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Marketable Securities Management
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Types of Marketable Securities
7. Money Market Mutual Fund.
This is an open-ended mutual fund that invests in money-market instruments.
Camille Alejandro Cayabyab - Reporter :)
Marketable Securities Management
Cash and Marketable securities
Management of one implies management of the other.
Reasons for Holding Marketable Securities
1. They serve as a substitute for cash balances
2. They are 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 payment,maturing bond issue and so on.
Factors Influencing the Choice
of Marketable securities
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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 rates.
c. Inflation risk. The risk that inflation will reduce the "real" value of the investment.
d. 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.
e. Event risk. The probability that some event (such as merger, recapitalization or a leverage buyout) will occur and suddenly will increase a firm's default risk.
2. Maturity
Marketable securities held should mature or can be sold at the same time cash is required.
3. Yield or return on securities.