What does the term 'liquidity' refer to in the context of securities?

Liquidity in the context of securities refers to the ease with which an asset can be bought or sold in the market without causing a significant change in its price. A security that is highly liquid can be quickly sold at a stable price, while a security with low liquidity may take longer to sell and could suffer considerable price fluctuations in the process.

In essence, liquidity is a crucial factor for investors, as it affects their ability to enter or exit investment positions efficiently. High liquidity is often associated with larger, more active markets or stocks, where there are many buyers and sellers interacting. This allows for smoother transactions and minimizes the cost associated with buying or selling the asset.

The other options do not define liquidity accurately. For instance, the time it takes to sell a security does relate to liquidity but doesn't encompass the broader concept of price stability during the transaction. Profitability of a security pertains more to its potential returns than its tradability. The amount of cash held by a corporation is a measure of its liquidity in a different context—financial liquidity rather than market liquidity. Thus, the definition that focuses on the ease of buying or selling a security without price impact is the most accurate representation of liquidity in the securities market.