How do you test Liquidity? surrounded by the stock open market.?
Answers:
Market liquidity have no formula to divide. It is only a relative number for that demanding trading volume as compared to other time or other stocks or even other market.
From stock price and trading volume, you can estimate the most possible trending. For e.g.
Price up & volume up = Bullish outlook
Price up & volume down = Bullish outlook
Price down & volume down = Flat to Bearish
Price down & volume up = Flat to Bearish
...
...
...
Price up & volume down = Bearish
... etc.
Cash/total assets. In other words, lolly divide by total assets (TA). TA includes owner's equity (nett assets) and liability.
For example, $100 cash/2000 TA is 5% (very low).
The complex the liquidity, the easier it is to pay packet a/c payables (bills). For a business that have one and only 5% liquidity, bills can arrive faster than income can be generate, cause financial difficulty for the business.
Trading volume.
High trading volume funds that if you want to deal in your investment, within is someone out in that that desires to buy it. In attachment, it probably mode that you can't affect the price next to a few shares.
Shares next to low trading volume, usually traded in smaller exchanges are considered smaller amount solution. This is because singular a small amount of trades are done per afternoon, and if you want to market, you might hold to 'continue' to find someone who requirements to buy. On illiquid stocks, you can procure REALLY screwed if you place a souk decree, because someone can swoop surrounded by for a unbelievably low price and almost steal the shares from you. Never place a flea market direct on low-volume shares - other use a aim direct.
-->Adam