I’m aware of the three categorizations of securities (and their treatment) in the balance sheet vs. the income statement: Trading Securities Available for Sale Securities Held to Maturity It makes sense that since marketable securities are part of the quick and cash ratio they must be fairly liquid securities, along the lines of Trading or Available for Sale securities. In any event, is there a specific definition for marketable securities? I would hate to be caught flat footed if asked for a simple yet formal definition… below is a good link. Would knowing these details about marketable securities suffice? http://www.wisegeek.com/what-are-marketable-securities.htm
If I am not mistaken, what you are referring to as Trading Securities/Marketable securities should be called “Financial assets at fair value through profit or loss (FVTPL)” per IFRS terminology. It is a category that includes. 1. Held for trading (HFT) 2. Electively designated into the category. The last subcategory is either called ‘Designated’ as in the CFAI book or just conveniently in practice called ‘FVTPL’ (through not 100% correct terminology) to differentiate it with the HFT subcategory. Per definition, an asset should be categorized as HFT if • instruments are traded for profit (“active and frequent buying and selling”) o intent to sell or repurchase in the near term, o part of a portfolio of instruments o derivatives (not financial guarantee contracts or designated and effective hedging instruments) • If there is no market value and fair value is not reliably measurable, it cannot be categorized as FVTPL Hope that I have answered your question.
In case you are aware of it yet: Available for Sale Financial Assets is a default category to be used if an asset cannot be classified as one of the other categories; i.e., FVTPL, HTM, or loans and receivables.
OP, to answer your question of what is a marketable security…the website you provided the link to is correct. Any security easily sold in the secondary market…mainly MM, Bonds, Equities. at work, we don’t consider options marketable securities, but they do fit the definition of being liquid and easily sold. not sure what’s up with the inconsistency there. but, I guess that’s becuase options aren’t an “asset,” they are a derivative.