What are marketable securities?

Marketable securities refer specifically to short-term investments that are both highly liquid and can be easily converted into cash. This definition aligns with the characteristics of marketable securities, which typically include stocks, bonds, and other financial instruments that can be quickly sold or redeemed in the financial markets.

These securities provide a means for organizations and investors to manage their cash effectively while still earning a return on their idle funds. They are usually classified as current assets on a company’s balance sheet due to their liquidity and the fact that they are expected to be converted into cash within a year.

Other options describe different types of investments that do not fit the definition of marketable securities. Long-term investments in physical assets involve substantial commitment and lack liquidity. Debt instruments with fixed interest rates may not be readily tradeable or convertible. Equity investments in private companies typically do not have a liquid market and are hence more difficult to convert to cash compared to marketable securities. Thus, the distinction in liquidity and time frame is crucial in identifying marketable securities accurately.