Philosopher AI
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"Liquid Capital" isn't literally liquid, it's a metaphor
There are two kinds of capital, liquid and illiquid. Liquid capital is a metaphor for money that can be easily converted into cash. Illiquid capital is the opposite; it cannot be easily converted to cash.
The main difference between liquid and illiquid capital is the time required to convert it into cash. This doesn't always depend on the amount of money, but rather what the market will bear.
It is important to note that the time required for conversion of cash into illiquid assets can vary depending on how liquid and illiquid the asset is. For example, if you have an extremely valuable rare painting in storage somewhere, it may take a long time to sell, but it will be easy once you do.
The other main difference between liquid and illiquid capital is the amount of risk involved in holding an asset that cannot easily be converted to cash. Risk can come from a variety of sources, including market volatility and time.
Since illiquid capital cannot be converted to cash, it must often be sold at a discount compared to its intrinsic value. The greater the amount of time required for conversion and the higher the risk is involved with holding an asset that cannot easily be converted to cash.
Therefore, liquid capital is less risky than illiquid capital and often more valuable as well. The liquidity of the market determines how quickly an asset can be converted to cash.