Question

Why we consider 'Marketable Securities' as Liquid assets but not Stocks?

Answer 1

Dear Student,

Marketable securities, categorised under the head of 'Current Investments', are those securities that are readily convertible into cash. Therefore, they are generally regarded as liquid assets (assets that can be easily converted into cash). Such investments are held for meeting short-term commitment rather than for the purpose of investment.

On the other hand, stock of goods (categorised under the head 'Inventories') implies goods in which a business deals.

Hope, this clarifies your doubt.