Accounting liquidity

Imagine you have a piggy bank with your favorite cookies instead of money. That's right, cookies! You love your cookies and you want to have enough of them so you can buy more whenever you like.

Accounting liquidity is like that, except with money instead of cookies. It means that a company has enough money or cash that they can use to buy things they need or want. If they don't have enough money or cash, they might have to sell something or borrow some money from someone else, which can be a problem.

Just like you want to make sure you always have enough cookies in your piggy bank, companies want to make sure they always have enough cash or liquidity to pay their bills, expenses and debts. This is important to keep their business running smoothly and to make sure they are financially stable.

So, just like you keep adding more cookies to your piggy bank, companies try to keep their liquidity levels high so they can use their money whenever they need it.