When it comes to different types of liquid assets, marketable securities are perhaps one of the topmost options. They are unrestricted financial options, which can be sold readily through a stock exchange and/or a bond exchange. These types of liquid assets are further divided into two categories, marketable equity securities and marketable debt securities.

Marketable equity securities
Marketable equity securities are an important type of liquid asset, which comprise shares of preferred stock or common stock. These can be traded, sold, or purchased on stock exchanges. These securities are usually considered as current assets as these are reported under the cash and cash equivalents account. These are short term and offer high liquidity.

Marketable equity securities – An example
Stocks are one of the most popular forms of marketable equity securities. Here, shareholders gain part ownership in the organization in which they have made an investment. On the other hand, the organization has the right to utilize the investment made by the shareholder as equity capital to finance its expansion and operations.

In return, depending on the profitability of the organization, the shareholder gets voting rights along with periodic dividends. Stocks can be quite volatile and their value can fluctuate depending on the current scenario of the organization. However, if you have good knowledge of equities and the stock market, then this type of liquid asset could be an ideal investment option.

Understanding marketable debt securities
Marketable debt securities are securities or debts that need to be redeemed or sold within one year. These include financial instruments like government bonds, certificates of deposit, or common stock, which can be easily converted to cash. If these securities or debt are expected to be converted in cash within one year, they are listed in the “current assets” section of a company’s balance sheet. If these are not trading securities, they are considered as “non-current assets.”

Marketable debt securities – An example
Bonds are the most popular type of marketable debt security. They are a convenient mode of capital for developing organizations. Bonds are a type of security issued by the government or an organization, which helps it in borrowing money from different investors. It is similar to a bank loan as it guarantees an assured rate of return. This rate of return is referred to as the “coupon rate,” which is given in return for the funds that are invested. The face value of a bond is its par value. Every issued bond comes with a maturity date, coupon value, and par value.

We hope you aren’t confused about the types of marketable securities anymore. We recommend that you approach a financial expert for guidance if you are interested in investing in these different types of liquid assets.