Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Marketable Securities

What it is:

Marketable securities are securities or debts that are to be sold or redeemed within a year. These are financial instruments that can be easily converted to cash such as government bonds, common stock or certificates of deposit.

How it works (Example):

If these securities and/or debt are anticipated to be converted into cash within one year, they are listed at their current market value, in the Current Assets section of the balance sheet. If they are not trading securities, they are listed as Non Current Assets.

Held to maturity and available for sale, securities can either be listed as long term or short term, depending on the maturity dates of the securities and the intention of management regarding conversion of these securities.

Why it Matters:

Marketable securities should be a relatively small figure on the balance sheet of most nonfinancial companies. Financial companies present marketable securities in a much more prominent place on their balance sheet since they derive a significant portion of their income from these investments. Analysts use this information for liquidity ratio analysis. Creditors are interested in the marketable securities figure in order to understand what assets are liquid (insert comma) in case the company has solvency issues. Creditors want to know what they can get a hold of in the event that bankruptcy is declared.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...