Marketable securities include common stock,Treasury bills,and money market instruments,among others. Businesses typically hold cash in their reserves to prepare them for situations in which they may need to act swiftly,such as taking advantage of an acquisition opportunity that comes up or making contingent payments.
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What are the characteristics of marketable securities?
Characteristics of marketable securities. The ability to be bought or sold on a public stock exchange or public bond exchange Having a strong secondary market that makes for liquid buy and sell transactions, as well as render an accurate price valuation for investors.
How are marketable debt securities held?
Marketable debt securities are normally held by a company in lieu of cash, so it’s even more important that there is an established secondary market. All marketable debt securities are held at cost on a company’s balance sheet as a current asset until a gain or loss is realized upon the sale of the debt instrument.
Can a company buy marketable equity securities?
However, they can still offer an additional interest rate that can generate a higher return than cash assets. Businesses can buy marketable equity securities to obtain equity or stock in another company. The acquiring business lists them as a current asset on their balance sheet.
What makes an investment marketable?
From a liquidity standpoint, investments are marketable when they can be bought and sold quickly. If an investor or a business needs some cash in a pinch, it is much easier to enter the market and liquidate marketable securities. For example, common stock is much easier to sell than a nonnegotiable certificate of deposit (CD) .