Marketable securities
Very liquid securities that can be converted into cash quickly at a reasonable price.
Marketable securities are very liquid as they tend to have maturities of less than one year. Furthermore, the rate at which these securities can be bought or sold has little effect on their prices.
Examples of marketable securities:
- commercial paper
- banker's acceptances
- government securities
- cashier's checks
- Treasury bills
- other money market instruments
Marketable securities are initially recorded on the balance sheet at cost, which consists of the market price and incidental costs to acquire them, including brokerage commissions and taxes, or market value, whichever is lower. Non–marketable securities include savings bonds and restricted shares/stock.
The purpose of having marketable securities is to keep up with inflation. If all of your cash equivalent reserves are tied up in cash, you will lose some of it each year due to inflation.
Investments in stocks or similar securities are not considered marketable securities for the balance sheet purposes. Even though they are also very liquid and can be converted to cash immediately, they have a much greater potential to lose value and are not viewed as cash equivalents.
12 Month Cash Flow Template
The best way to manage your cash levels is with a cash flow analysis tool. This cash flow template is this kind of a tool. Lay out your cash inflows and outflows in an organized fashion and monitor your cash balances from day to day or week to week. This way you will know in advance when you cash balance will be high enough to transfer some of it to marketable securities.
Don't lose interest income by having large cash balances just sit in your bank account, but also don't get caught off guard by a large bill you overlooked. No need to pay overdraft fees when you can easily predict and control your cash balance. Managing your cash is not hard, but it does take some organization and some time staying on top of it regularly. Let this cash flow template do the math for you and help you stay in control of your cash.
Balance Sheet Templates
1, 3 and 5 year balance sheet templates for three different legal entities: LLC, corporation and a sole proprietor.
Balance Sheet Analysis
Learn how to analyze a balance sheet in terms of company's liquidity and solvency using financial ratios such as the current ratio, quick (or acid) ratio, debt to asset ratio and debt to equity ratio.
Return from marketable securities to Sample Balance Sheet
Return from marketable securities to Small Business Accounting
