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In the management of cash and marketable securities why should the primary concern be for safety and liquidity rather than maximizing of profit?
i think there is 3 reasons for the firm to get more safety and liquidity cash :
- transaction balances : the transaction motive involves the use of cash to pay for planned corporate expenses such as supplies, payrolls, and taxes.
-compensating balances for banks : for services provided rather than paying directly for those services.
- precautionary needs: assume management wants cash for emergency purposes when cash inflows are less than projected.
What else can I help you with?
Are annuities marketable securities?
Annuities are not considered marketable securities. They are financial products issued by insurance companies that provide a stream of income, typically for retirement, and are not traded on public exchanges like stocks or bonds. Marketable securities, on the other hand, are financial instruments that can be easily bought or sold in the financial markets. Annuities generally have specific terms and conditions that limit their liquidity compared to marketable securities.
Why don't business use marketable securities more extensively to finance their activities?
Businesses often avoid using marketable securities extensively for financing due to their inherent volatility and the associated risk of fluctuating market values. Additionally, relying heavily on marketable securities can limit a company's liquidity and flexibility, as these assets may need to be sold at a loss during unfavorable market conditions. Furthermore, the costs and complexities of managing a portfolio of marketable securities can outweigh the benefits, leading firms to prefer more stable financing options like loans or retained earnings.
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 is a marketable security?
A marketable security is a financial instrument that can be quickly converted into cash at a reasonable price, typically because it is traded on a public exchange. These securities include stocks, bonds, and other financial assets that have a liquid market. Their high liquidity and standardized nature make them easily accessible for investors looking to buy or sell. Marketable securities are often included in a company's balance sheet as short-term investments.
What are non-marketable securities?
Non-marketable securities are financial instruments that cannot be easily bought or sold on public exchanges due to a lack of liquidity. Examples include private equity investments, certain bonds, and shares in privately held companies. These securities typically have restrictions on transferability and may require a long-term commitment from investors. As a result, they often carry higher risks but can also offer potential for higher returns.
WHAT IS unified global theory of management'- discuss the tendencies favouring?
1. In the management of cash and marketable securities why should the primary concern be for safety and liquidity rather than maximizing of profit? Justify your views.
How does cash and marketable securities differ?
Marketable securities are those securitues which can be marketed. eg- we can market the share of any company, debentures can also be marketed, and liquidity of these instruments become very high. while we can't market some instruments, like savings schemes of Post offices and also the liquidity of such instruments become so low. so, cash is different thing and it has nothing to do with marketable securities. because the concept of marketable security is different.Cash can be compare with marketable securities on the basis of its liquidity.
In managing cash and marketable securities what should the manager's primary concern?
Liquidity and Safety
Are annuities marketable securities?
Annuities are not considered marketable securities. They are financial products issued by insurance companies that provide a stream of income, typically for retirement, and are not traded on public exchanges like stocks or bonds. Marketable securities, on the other hand, are financial instruments that can be easily bought or sold in the financial markets. Annuities generally have specific terms and conditions that limit their liquidity compared to marketable securities.
Why don't business use marketable securities more extensively to finance their activities?
Businesses often avoid using marketable securities extensively for financing due to their inherent volatility and the associated risk of fluctuating market values. Additionally, relying heavily on marketable securities can limit a company's liquidity and flexibility, as these assets may need to be sold at a loss during unfavorable market conditions. Furthermore, the costs and complexities of managing a portfolio of marketable securities can outweigh the benefits, leading firms to prefer more stable financing options like loans or retained earnings.
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.
Is marketable securities consider a assets or liabilities?
Marketable securities are considered assets. They are financial instruments that can be easily converted into cash, typically within a year, and are often held by companies for investment purposes or as a means to manage liquidity. As assets, they appear on the balance sheet under current assets, reflecting their potential to generate cash flow.
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 is a marketable security?
A marketable security is a financial instrument that can be quickly converted into cash at a reasonable price, typically because it is traded on a public exchange. These securities include stocks, bonds, and other financial assets that have a liquid market. Their high liquidity and standardized nature make them easily accessible for investors looking to buy or sell. Marketable securities are often included in a company's balance sheet as short-term investments.
What are non-marketable securities?
Non-marketable securities are financial instruments that cannot be easily bought or sold on public exchanges due to a lack of liquidity. Examples include private equity investments, certain bonds, and shares in privately held companies. These securities typically have restrictions on transferability and may require a long-term commitment from investors. As a result, they often carry higher risks but can also offer potential for higher returns.
What are the disadvantages of reducing marketable securities?
Reducing marketable securities can lead to decreased liquidity, making it harder for a company to quickly access cash for operational needs or unexpected expenses. It may also limit investment opportunities, as fewer funds are available to capitalize on new ventures or respond to market changes. Additionally, a reduction in marketable securities can negatively impact a company's risk profile, potentially increasing its cost of capital. Finally, it may signal to investors that the company is struggling to generate cash flows, which could adversely affect stock prices.
What is the relationship between the yield and liquidity of securities?
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