What are marketable securities?

Marketable securities are defined as short-term, highly liquid investments that can be quickly converted into cash or cash equivalents with minimal impact on their value. This characteristic makes them an essential component of a company’s liquidity management, as they provide a way to meet short-term financial obligations while still earning a return on excess cash.

These securities typically include stocks, bonds, and other financial instruments that are actively traded on public exchanges or in robust over-the-counter markets. Their liquidity means that they can be sold easily and quickly, enabling investors or companies to access cash when needed without significant delay or loss of value.

The distinction lies in their nature; they are not long-term investments, which focus more on growth or yield over a more extended period but rather are intended for short-term financial management and capital preservation. This understanding highlights the practical role that marketable securities play in a business's overall financial strategy.