Marketable securities are short-term investment instruments to obtain a return on temporarily idle funds. They are securities, which can be converted into cash in a short period of time, typically few days. To be liquid, it should have two basic characteristics.
Basic Characteristics of Marketable securities:
Ready market: Ready market reduces amount of time required to convert a security into cash. Ready market should have breadth (large number of participants scattered over large geographical area) and depth (ability to absorb purchase/ sale of large number of securities.)
Safety of principal amount: There should not be any loss of principal amount invested in the security. Then only it is worth investing in such securities. Otherwise, the investing firm is anyway better off maintaining idle cash/ bank balance.
Examples of Marketable securities are: Treasury Bills, Commercial Paper, Banker’s Acceptance, Repurchase agreements, Inter-corporate Deposits, Bill Discounting, call market, etc.
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