Temporary excess cash can be invested in marketable securities. What are the characteristics of marketable securities?...

Temporary excess cash can be invested in marketable securities. What are the characteristics of marketable securities? If excess cash is projected to be continuing rather than temporary, are marketable securities the appropriate investment? Explain your answer.

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Expert Solution

Marketable securities

These include stocks, bonds and financial instruments which are very liquid in nature.

They can be withdrawn at any moment

Eg. Tbills, Bonds short term, Money market securities, etc.

Characteristics

Liquidity - As the name says these securities are liquid in nature which makes attractive investments

Transferable - These securities are highly transferable can be transferred from one to other also on exchanges

The principal is safe - securities have lower default risk and hence low returns. It has assured return on the principal amount

if excess cash is projected to be continuous rather than temporary, are marketable securities the appropriate investment?

Yes investing in these securities would be appropriate as these would help you to gain return instead of keeping in cash reserves also, these are the best investments for paying short term debts which would help your investments grow with interest and dividend.

Maintaining these securities would also improve the solvency ratio of the company

jeff jeffy answered 9 months ago

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