Liquidity denotes the ability to quickly convert an asset to cash or pay a liability. Liquidity is a measure of the ability to readily convert an asset to cash compared to marketability which is the ability to quickly convert an asset to cash at a minimal cost. Investments in treasury bills carry a low liquidity risk because of the ease with which they can be converted into cash compared with investments in private companies which carry high liquidity risk because of the difficulty in converting the investment into cash due to the absence of active markets.