Define 'liquidity.'

Liquidity refers to a company's ability to meet its short-term obligations and manage its immediate financial responsibilities. This is essential for maintaining operational stability, as it ensures that the company can pay off debts, purchase inventory, and cover other short-term expenses as they arise.

A company's liquidity is typically assessed using financial metrics like the current ratio or quick ratio, which compare liquid assets to current liabilities. High liquidity indicates a strong financial position, as it signals that the company can readily convert assets into cash to satisfy its immediate financial commitments. This concept is crucial for stakeholders, including investors, creditors, and management, who need to understand how well a company can sustain itself in the short term amidst varying cash flow situations.

In contrast, the other choices relate to different aspects of a company's financial health. Generating revenue relates to operational performance, while the overall value of a company's assets pertains to its net worth. The ratio of debts to total assets focuses on leverage and financial risk rather than the ability to cover short-term obligations.