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Marketable Securities
Marketable Securities
Marketable Securities
liquid, meaning that they can be quickly sold in the secondary financial markets in large amounts for cash. There are different types of marketable securities, and the underlying theme among all of them is that they are traded, or bought and sold, frequently. This is a sign of liquidity.
company makes on a temporary basis. Marketable securities are temporary investments one company might make in another company, with the hope of providing higher returns to its investors.
notes issued by financial institutions and other corporations to raise cash. bankers' acceptances:- drafts drawn on a specific bank by an exporter in order to obtain payment for goods he has shipped to a customer who maintains an account with that specific bank. negotiable certificates of deposit:- marketable receipts for funds that have been deposited in a bank for a fixed period of time. repurchase agreements:- legal contracts that involve the actual sale of securities by a borrower to a lender with a commitment on the part of the former to repurchase the securities at the current price plus a stated interest charge.
rate risk. 2. Default Risk: usually very low 3. High degree of Liquidity a. can be sold quickly b. low cost of transaction c. no price pressure effect when buying and selling 4. Tax considerations a. firms often use municipal bonds, U.S. Government Tbills, etc. b. dividend exclusions for corporations: up to 80%