MARKETABLE SECURITIES-selection criterion.pptx

MARKETABLE SECURITIES-selection criterion

1. MARKETABLE SECURITIES SELECTION CRITERION Aubrey V. Dotillos

2. Factors that influence the choice of marketable securities: Maturity - The length of time for which the excess cash is expected to be available should be matched with the maturity of the marketable securities. Liquidity and Marketability - Liquidity refers to the ability to transform a security into cash. The marketability feature also includes the time gap required for sale of securities and the transaction costs of sale.

3. The Default risk - probably the most important aspects of the selection process. The primary motive while selecting a marketable security is that the firm should be able to get back the cash when needed. Yield - This criterion involves an evaluation of the risks and benefits inherent in different securities. If a given risk is assumed, such as lack of liquidity, a higher yield may be expected on the less liquid investments.