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What does a negative value of cash and marketable securities mean?
A negative value of cash is an overdraft. It represents money owed to the bank, usually for overdrawn checks. Marketable securities can rarely have a negative value. This is because the lowest possible value of most marketable securities is zero; investing in a marketable security should not result in a liability. Certain financial instruments could have negative values, meaning that the holder of the financial instrument owes an economic sacrifice to its counterparty. This should be recorded as a liability at fair market value.
What is the main reason between current ratio and acid test ratio?
The main difference between the current ratio and the acid-test ratio lies in the assets they consider. The current ratio includes all current assets, such as inventory, while the acid-test ratio excludes inventory and focuses only on the most liquid assets (cash, marketable securities, and receivables). This makes the acid-test ratio a more stringent measure of a company's short-term liquidity, as it assesses the ability to meet current liabilities without relying on inventory sales. Thus, the acid-test ratio provides a clearer picture of immediate financial health.
How can you tell the financial standing from assets and liabilities?
Logically, your liabilities taken away from your assets would show you your financial standing: assets - liabilities = how much money you have If your liabilities are greater than your assets, your answer will be negative and you're in debt. If your assets are greater than your liabilities, your answer will be positive and you have enough assets to get rid of your liabilities.
What are some pros of receivables factoring?
There are many advantages when factoring account receivables. Some of these include receiving cash quicker. As well, credit checks are not required by factoring receivables through a financial institution either.
Is accounts receivables considered an asset?
Yes. Accounts receivable, or receivables for short, represent a financial obligation to the organization and are represented on the asset side of the balance sheet.
What is the Importance of marketable securities in financial management?
For companies that are financial institutions (banks), and insurance companies, Marketable Securities are a significant portion of their income. Depending on the industry of other companies, this line item on the Balance Sheet should be relatively small. For example, manufacturing companies might have some Marketable Securities, but this figure should pale in comparison to their inventory, and plant, property and equipment figures.
What is the definition of a liquidity ratio?
Liquidity ratio are designed to test a company's ability to meet its short-term financial obligations. To find the ratio, you take Cash and Cash Equivalent + Marketable Securities + Accounts Receivable divided by Current Liabilities.
What does a negative value of cash and marketable securities mean?
A negative value of cash is an overdraft. It represents money owed to the bank, usually for overdrawn checks. Marketable securities can rarely have a negative value. This is because the lowest possible value of most marketable securities is zero; investing in a marketable security should not result in a liability. Certain financial instruments could have negative values, meaning that the holder of the financial instrument owes an economic sacrifice to its counterparty. This should be recorded as a liability at fair market value.
Use the Wall Street Journal or some other financial publication to find the going interest reate for marketabe securities?
I'm unable to browse the internet in real-time to provide current interest rates for marketable securities. I recommend checking reputable financial websites like the Wall Street Journal, Bloomberg, or CNBC for the most up-to-date information on interest rates for marketable securities.
What are asset baked securities?
Asset backed securities is a financial security backed by a loan, lease or receivables against assets other than real estate and mortgages. For investors, asset backed securities are an alternative to investing in corporate debt.
Why do banks issue credit card securities?
Banks issue credit card securities to securitize their credit card receivables, transforming them into tradable financial instruments. This process allows banks to raise capital by selling these securities to investors, thereby improving liquidity and diversifying their funding sources. Additionally, it helps banks manage credit risk by transferring a portion of it to investors while still retaining a portion of the receivables on their balance sheets.
How are assets and liability treated?
If asset is increased it is Debited in Ledger and if liability increases it is credited. Accounts Receivables are treated as assets. Both Assets and Liabilities are shown in face of Statement of Financial Position.
What is the main reason between current ratio and acid test ratio?
The main difference between the current ratio and the acid-test ratio lies in the assets they consider. The current ratio includes all current assets, such as inventory, while the acid-test ratio excludes inventory and focuses only on the most liquid assets (cash, marketable securities, and receivables). This makes the acid-test ratio a more stringent measure of a company's short-term liquidity, as it assesses the ability to meet current liabilities without relying on inventory sales. Thus, the acid-test ratio provides a clearer picture of immediate financial health.
How can you tell the financial standing from assets and liabilities?
Logically, your liabilities taken away from your assets would show you your financial standing: assets - liabilities = how much money you have If your liabilities are greater than your assets, your answer will be negative and you're in debt. If your assets are greater than your liabilities, your answer will be positive and you have enough assets to get rid of your liabilities.
In the management of cash and marketable securities why should the primary concern be for safety AND liquidity rather than profit maximization?
the firm may hold excess funds in anticipation of cash outlay.when funds are being held for other than immediate transaction purposes, they should be converted from cash into interest-earning marketable securities which should be of highest investment grade usually consist of treasury bills, commercial paper, certification of time deposits from commercial banks realistically, management of cash and marketable securities cannot be separated. management of one implies management of other reasons for holding marketable securities there are several reasons for holding marketable securities such as 1. they serve as a substitute for cash balances many firms prefer to hold marketable securities as a substitute for transaction balances, precautionary balances, for speculative balances of for all three. in most cases the securities are held primarily for precautionary purposes or as a guard against a possible shortage of bank credit. 2. they held as a temporary investment where a return is earned while funds are temporarily idle. 3. they are built up to meet known financial requirements such as tax payments, maturing bond issue and so on. factors influencing the choice of marketable securities among the factors that will influence the choice of marketable securities 1. risk such as a. default risk. the risk that the issuer of the security can not pay the principal or interest at due dates. b. interest rate risk. the risk of declines in market values of the security due to rising interest rate c. inflation rate. the risk that inflation will reduce the real value of the investment. in periods of rising prices, inflation risk is lower on investments whose returns tend to rise with inflation than on investment whose return are fixed. 2. maturity MARKETABLE SECURITIES held should mature or can be sold at the same time cost is required. 3. yield or returns on securities. generally, the higher a security's risk the higher its required return. corporate investors, like other investors must make a trade-off between risk and return when choosing marketable securities. because these securities are generally held either for specific known need or for use in emergencies, the portfolio should consist of highly liquid short-term securities issued by the government or very strong corporations. treasurers should not sacrifice safety for higher rates of return. 4. Marketability (liquidity) risk this refers to the risk that securities cannot be sold at close to the quoted market price and is closely associated with liquidity risk.
What are some pros of receivables factoring?
There are many advantages when factoring account receivables. Some of these include receiving cash quicker. As well, credit checks are not required by factoring receivables through a financial institution either.
What is the population of The Receivables Exchange?
As of 2021, The Receivables Exchange is a financial institution platform that facilitates the buying and selling of accounts receivable from businesses. It does not have a population in the traditional sense as it is not a residential area.
