Marketable securities mean a short term financial assets that create interest for its holders and easily be converted into cash. They are securities or debts that are to be sold or redeemed within a year. At any time a security holder can sell this security in the financial market and can collect cash from selling this security.
Types of marketable securities: Marketable securities may be various types. Some / main types of securities are as follows –
(1) Treasury bills: The bill which is issued by the government and that is issued on discount then face value is called treasury bills. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and a slight risk of default.
(2) Commercial paper: “Commercial paper represents a short term, unsecured promissory note, issued to the public in minimum units of 25000.” It emerged as a source of short term finance in our country in the early nineties. Commercial paper is an unsecured promissory note issued by a firm to raise funds for a short period, varying from 90 days to 364 days.
(3) Banker’s acceptance: Bankers acceptance arises from a short term credit arrangement used by business to finance a transaction, especially those involving firms in foreign countries or firm with unknown credit capacities. It is a short-term debt instrument issued by a company that is guaranteed by a commercial bank.
(4) Mutual fund: Money market mutual fund often called money fund are professionally managed portfolios of marketable securities. A mutual fund is a collective pool of money provided by individuals for money managers to invest in various securities