Give two reasons why business hold marketable securities Which types of securiti

Question

Give two reasons why business hold marketable securities Which types of securities are most suitable for holding as marketable securities? Suppose Southwest Rep Medical Center has just raised S6 million in new capital that it plans to use to build three freestanding clinics, one each year over the next three years. (For the sake of sir ..ity, assume that equal payments have to be made at the end of each of the next three years.) What securities should be bought for the firm's marketable securities portfolio. ~Assuming that the firm has no other excess cash? Now. consisder the situation faced by the Huntsville Physical Therapy Group. It has accumulated $20,000 in cash above its target cash balance, and it has no immediate needs for his excess cash However, the firm may at any time need some part or all of the $20,000 to meet unforeseen cash needs. What securities should be bought for the firm's marketable securities portfolio?

Explanation / Answer

d. Should go for that securities which are to be most liquid and can be easiliy converted in cash whenever required.

Liquid assets include most stocks, money market instruments and government bonds. The foreign exchange market is deemed to be the most liquid market in the world because trillions of dollars exchange hands each day, making it impossible for any one individual to influence the exchange rate.

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