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.