Liquidity
Ability to meet short-term financial obligations; having cash/convertible assets available.
Real World
Phones4U was profitable on paper but collapsed in 2014 when EE and Vodafone cancelled contracts simultaneously, leaving it unable to pay short-term debts — a textbook case of a profitable yet illiquid business.
Exam Focus
Use the phrase 'profitable but illiquid' to gain evaluation marks — it shows you understand profit and cash are not the same thing.
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