Marketable Securities

Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. They are commonly used by companies and investors to manage cash reserves or to temporarily hold funds before making a longer-term investment. Marketable securities are a subset of short-term investments, typically having a maturity of less than one year. Here are the key characteristics of marketable securities:

1. High Liquidity: They can be easily bought or sold in the market without significantly affecting their price.

2. Short-term Maturity: Generally, these securities have maturities of less than one year.

3. Low Risk: They are considered low-risk investments due to their short-term nature and the financial stability of the issuers.

Common types of marketable securities include:

• Treasury Bills (T-Bills): Short-term government debt securities.

• Commercial Paper: Unsecured, short-term debt issued by corporations.

• Certificates of Deposit (CDs): Time deposits offered by banks with fixed interest rates and maturity dates.

• Money Market Instruments: Various short-term investments like money market mutual funds.

• Stocks and Bonds: Though not all stocks and bonds are considered marketable securities, those that are traded on major exchanges and have high liquidity qualify.

Marketable securities are crucial for businesses and investors who need to maintain liquidity while earning a return on idle funds. They are often found on the balance sheet under current assets due to their ease of conversion into cash.