Liquidity is a measure of how easily a business or a bank can get cash. Cash in a checking account gives a company liquidity, but so do non-cash assets that are easy to sell, such as publicly traded stocks. A bank liquidity statement is also called "an analysis of maturity of assets and liabilities." It's a document that measures whether a bank has enough liquid assets to meet its financial obligations.
Timing is Everything
A liquidity statement shows not only the bank's assets and liabilities but also covers timing: how long before the assets can be turned into cash and how long before the debts come due. If, say, a bank has substantial investments, but it can't tap any of them for five years, that won't help pay debts due in the next six months. A well-run bank has enough liquidity to cover liabilities when they come due. It also has enough extra liquidity to meet unexpected demands, such as depositors making heavy withdrawals.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.