Question

What’s the point of marketable securities short term? What is the company benefitting from shouldn’t they...

What’s the point of marketable securities short term? What is the company benefitting from shouldn’t they just hold onto cash

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Answer #1

Answer: Marketable securities are unrestricted short-term financial instruments i.e. sold or redeemed within a year which are issued either for debt securities or for equity securities of a publicly listed company. Such financial instruments can be easily converted to cash such as common stock, government bonds, or certificates of deposit. Marketable securities earn interest revenue or dividend for the company. If a firm is holding a huge sum of cash and does not invest it anywhere, it will generate nothing for the firm. These also generate a return when there is an increase in the market value. Thus in instead of having cash sit idly, the company invests in short term marketable securities to earn returns on it

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