10.6 : Management of Marketable Securities

The management of marketable securities is a critical component of financial strategy for businesses and investors. Marketable securities are short-term investments, such as Treasury bills, bonds, and money market instruments, that can be easily converted into cash with minimal loss in value. The primary significance of managing these securities lies in maintaining liquidity while earning a modest return on idle funds.

Effective management ensures an organization has sufficient liquidity to meet unexpected cash needs without compromising financial stability. For example, a company may need quick access to funds to seize new business opportunities, cover operational expenses, or manage short-term liabilities. By investing in marketable securities, the company can have cash readily available without borrowing at unfavorable terms or liquidating long-term assets.

Additionally, managing marketable securities allows companies to profit from surplus cash that would otherwise remain idle. Even though the returns are usually modest, they help improve overall profitability. This approach also mitigates risks, as these investments are generally low-risk and highly liquid.

In summary, the management of marketable securities balances the need for liquidity and profitability, ensuring that funds are available when required while optimizing returns on short-term idle cash.