Liquidity of financial assets

Liquidity refers to how quickly and easily an asset can be converted to cash without loss of value. Currency (4) is the most liquid as it is already cash. Demand deposits (1) are the next most liquid as they can be withdrawn on demand immediately. Savings deposits (3) have less liquidity than demand deposits because withdrawals may have some restrictions or notice requirements. Time deposits (2) are the least liquid because they are locked in for a specific period and cannot be withdrawn before maturity without penalty. Therefore, the correct sequence in decreasing order of liquidity is 4-1-3-2. > Liquidity ranking: Currency > Demand deposits > Savings deposits > Time deposits