Which of the following is not a reason for firms to own marketable securities?
A)Marketable securities serve as a substitute for cash balances.
B)Marketable securities offer a place to temporarily put cash balance to work earning a positive return.
C)Marketable securities are used as a temporary investment to finance seasonal or cyclical operations.
D)Marketable securities are used as a temporary investment to amass funds to meet financial requirements in the near future.
E)Marketable securities are more liquid than cash balances.

Question

Quizplus · Accepted Answer

The reason for firms to own marketable securities is not because they are more liquid than cash balances. In fact, cash balances are considered the most liquid asset a firm can hold. Firms own marketable securities for the other reasons listed, such as as a substitute for cash balances or a place to temporarily put cash to work earning a positive return.

Which of the Following Is Not a Reason for Firms