What is the difference between liquidity and liquidation?

Definition of Liquidity

Liquidity usually refers to a company's ability to pay its bills when they become due. Liquidity is often evaluated by comparing a company's current assets to its current liabilities.

The following are often referred to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company's ability to pay its current obligations:

Definition of Liquidation

Liquidation is a term commonly used to describe a company selling parts of its business for cash, selling its assets in order to pay debts, or the process of winding down or closing a business.

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