Question

Liquidity is the ability to accommodate ______ in

Q: Answer-Liquidity is the ability to accommodate ______ in liability and _____ in assets.

Liquidity is ability to accommodate decrease in liability increase in assets. Liabilities are the sources of funds and hence a decrease in liabilities means reduction in sources or repayment, which is not managed well can lead to liquidity problems. An increase in assets requires liquidity and hence needs to be managed well.