MARKETABLE SECURITIES Meaning and
Definition
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Marketable securities refer to easily tradable financial instruments that can be quickly converted into liquid cash in the open market. These securities are typically held by corporations, institutions, or individuals as part of their investment portfolio. They are considered marketable because they possess high liquidity and can be easily sold or exchanged for cash without significant price volatility.
Marketable securities include various types of assets such as stocks, bonds, Treasury bills, commercial paper, and certificates of deposit (CDs). These securities are typically traded on organized exchanges or through over-the-counter (OTC) markets, allowing investors to buy or sell them at prevailing market prices.
The primary purpose of investing in marketable securities is to generate short-term returns on idle funds and to provide liquidity to investors should the need for cash arise. Marketable securities are considered less risky compared to long-term investments, such as real estate or long-term bonds, as their value can be easily determined and they can be swiftly converted into cash.
Corporations often hold marketable securities as part of their treasury management strategy to manage cash flow effectively and generate additional income from surplus funds. They may also act as short-term investments for investors looking for a secure and relatively stable return on investment.
In summary, marketable securities are highly liquid financial instruments that can be easily traded in the market and readily converted into cash. They serve as short-term investment vehicles and provide flexibility and liquidity to corporations and investors alike.
Etymology of MARKETABLE SECURITIES
The word "marketable" derives from the verb "market", which dates back to the late Middle English period. "Market" stems from the Old Northern French word "market", meaning "a market" or "a marketplace". It can be traced further back to the Latin word "mercatus", meaning "trade" or "market".
The term "securities" refers to investment instruments that can be bought or sold, such as stocks, bonds, or derivatives. Its etymology can be traced to the Latin word "securitas", meaning "security" or "safety".
When combined, "marketable securities" refers to tradable financial instruments that can be easily bought or sold in the marketplace.
