Cash and Marketable Securities

This article will explain cash and marketable securities and will describe how these assets function in corporate finance analysis. The article will identify the common types of cash accounts and will explain how corporations control the flow of cash to regulate their financial needs. It will also describe the various types of marketable securities, including treasury bills, commercial paper, bankers' acceptances and other forms of money market securities. In addition, discussions of the common reasons why corporations hold marketable securities are provided, such as to earn higher rates of interest than cash accounts, to take advantage of the liquidity in the short-term investment market and because marketable securities require minimal ongoing managerial oversight. Finally, the article will describe how corporations and financial analysts report and use cash and marketable securities in common business activities, such as in creating accurate balance sheets, meeting accounting and financial reporting requirements and building liquid reserves in anticipation of a significant financial transaction.

Keywords Balance Sheet; Bankers' Acceptances; Cash; Commercial Paper; Liquidity; Maturity Date; Money Market; Treasury Bills

Finance > Cash & Marketable Securities

Overview

Cash and marketable securities are current, liquid assets that companies may use for a variety of reasons, such as to pay its business obligations, to support its viability during a period of reduced sales or an economic downturn or to earn interest for a short period of time before being used for a significant acquisition. Like most people, many companies prefer to keep a reserve of cash and marketable securities on hand that can easily be sold for cash to cover unanticipated expenses or losses. While cash is readily available legal tender, marketable securities are short-term investments that are routinely sold on exchanges, have a readily determined fair market value and can be converted into cash at any time. The most common types of marketable securities are commercial paper, banker's acceptances, Treasury bills and other money market instruments.

Cash and marketable securities are considered current assets on a firm's balance sheet. The balance sheet is a type of financial statement that shows a company's overall financial position at a given moment in time. Companies typically create a balance sheet at the end of their fiscal year to get an accurate depiction of their financial standing. A balance sheet always lists a company's assets and liabilities, and these are usually displayed side by side in two separate columns: assets in one column and liabilities and shareholders' equity in the other. Under the assets column, the balance sheet lists the firm's current assets in order of their liquidity, beginning with those that are most easily converted into cash within the accounting cycle, which is typically one year. Current assets include cash and marketable securities as well as other types of assets. Thus, using balance sheet entries, companies routinely account for their cash and marketable securities holdings in order to keep an accurate depiction of their monetary position at any point in time.

The following sections provide a more in-depth explanation of cash and marketable securities and the role that they play in corporate finance and accounting.

Understanding Cash

Cash Accounts

The most common types of cash accounts are general cash accounts and other corporate accounts, such as payroll accounts, petty cash accounts and bank branch accounts. Corporations hold cash in these accounts for several reasons. The most common reason is to meet payment obligations that arise in the ordinary course of business. Another reason is so that a company has readily available assets that it can use to take advantage of temporary opportunities for investment or the purchase of a significant acquisition. A third reason companies keep cash is to maintain a cushion or buffer to meet any unexpected financial needs that may arise in the event of periodic losses or an economic downturn.

While cash accounts are relatively simple for a company to maintain, companies must also effectively manage the flow of cash that moves into and out of its accounts. For instance, when a company has received payments or experiences an inflow of cash, it must select the best investment or savings account to hold the cash, balancing its short-term and long-term need for readily available cash against the higher returns that are often available from investment options the cash could purchase. In addition, companies must also regulate the collection and distribution of cash payments using procedures that are in its best interest while being ethical and building rapport with its vendors so that it can maximize its financial position at any given point in time. To do so, a company may emphasize prompt collection of cash receipts so to ensure a steady inflow of finances while adopting disbursement methods that slow down its cash payouts to minimize the outflow of company resources. The procedures are described in more detail below.

Expediting Cash Receipts

No matter what its strategy for managing its assets and liabilities, a company must still regulate and report its cash accounts to conform with accounting and financial reporting requirements that are set by generally accepted accounting principles and government regulations. However, there are several techniques that companies can use to enhance the rate at which they send invoices and collect receipts so that their inflow of cash is enhanced. These techniques include expediting the preparation and mailing of company invoices, automating the billing and payment cycle, sending invoices with shipments or faxing invoices with prompt payment due dates and establishing a system of preauthorized debits so that a payor's funds are transferred to the company electronically.

A preauthorized debit is a transfer of funds from a payor's bank account on a specified date to the payee's bank account whereby the payor provides advance authorization for the payee to initiate the transfer when payment is due. This system can be set up so that a payor provides a payee with advance authorization for routine transfers of funds, generally for a specified amount on a specified date, and for a finite period of time or until the payor's financial obligation is fulfilled. Automated payments are a particularly advantageous means by which companies may expedite cash receipts because they minimize the time and expense that is required when an employee would otherwise have to create invoices, mail the invoices (perhaps at the company's expense), credit payments received to individual customer accounts and monitor delinquent accounts for collection efforts.

The reason companies seek to implement policies that will expedite the collection of their cash receipts is to enhance the inflow of corporate cash, which affords a company the possibility of greater returns if it invests its increased cash reserves in interest-bearing accounts or securities. By expediting and automating the process of receiving cash receipts while minimizing company expenses involved in collecting payments, a company may maximize its inflow of cash receipts so that it can use these resources for purposes that are most advantageous to its stability and growth.

Harnessing Cash Payouts

Another way that a company can enhance its cash resources is to slow down the rate at which it pays its outstanding debts. This process is sometimes referred to as "playing the float," which means that a company will attempt to extend the float, or the time period between the date it makes a payment and the date the payment is debited from its account, so that it is able to draw interest on its funds as long as possible. One way a company may harness its cash payouts is by minimizing its accounts payable into a fewer number of accounts so as to reduce the number of its disbursements. Another method is to use forms of payment that delay the time in which the payee's account is credited with funds from the company's account. For instance, a company may use payable through draft instruments, which are drawn against the payor and not against a bank, as are checks. After the payee presents a payable through draft instrument to a bank for deposit, the payor may still determine whether to honor or refuse the payment, which slows down the time it takes for a payee to receive the funds and increases the time in which the company has control of the funds. In addition, a company may use a remote disbursement method, in which the firm directs checks to be drawn on a bank that is geographically remote from its customer so as to maximize the time it will take for its check to clear. For instance, a California business may pay an Illinois supplier with a check drawn on a bank in Delaware. The supplier must wait until the Delaware bank clears the check in order for the funds to be credited to its account. Finally, a company may also use controlled disbursements, in which the company directs checks to be drawn on a bank that can provide it with notification each morning of the total dollar amount of checks that will be presented against its account later that day so that the company may more accurately predict its total disbursements on a day-to-day basis.

Cash Accounting Procedures

While companies may use different methodologies to control the inflow and outflow of corporate cash, companies must still comply with proper accounting procedures and governmental regulations regarding corporate finance reporting. Companies must set up proper cash management procedures to ensure that all cash receipts and payments have been promptly and accurately deposited and recorded so that their financial statements remain correct and current. In addition, companies must consider how best to hold and invest cash reserves so that their financial well-being and growth objectives are considered along with the interests of their shareholders, if they are publicly owned. Most companies maintain cash balances that are adequate to meet their financial needs but not excessive, as extra cash can be used to invest in securities and other investments that typically pay higher interest rates than most savings accounts, where cash is typically held.

Understanding Marketable Securities

Marketable securities are highly liquid, short-term securities that tend to have maturity dates of less than one year. Companies invest in marketable securities to recoup relatively higher interest rates while retaining the convenience of being able to easily convert these securities into cash should the need arise. Marketable securities are listed as a current asset on a balance sheet. Examples of marketable securities include commercial paper, banker's acceptances and Treasury bills. In addition, marketable securities can include money market instruments such as repurchase agreements, which are agreements to buy securities and resell them at a higher price at a later date; federal agency securities, which are debt securities issued by federal agencies and government-sponsored enterprises and money market preferred stock, or preferred stock that has a dividend rate that is reset at auction every 49 days.

The following sections describe the most common forms of marketable securities in more detail.

Treasury Bills <<<

Treasury bills, often referred to as "T-bills," are short-term debt obligations that are backed by the U.S. government and have a maturity date of less than one year. T-bills are sold in denominations of $1,000 and usually have maturities of four weeks, 13 weeks (about three months) or 26 weeks (about six months). T-bills are issued through a competitive bidding process and are sold at a discount and redeemed at maturity for full face value. This means that investors who purchase T-bills do not receive fixed interest payments while holding the bills, but instead receive the appreciation of the T-bill when the U.S. government pays back its IOU on the T-bills' maturity date. For example, if an investor buys a 13-week Treasury bill priced at a discount at $980, the U.S. government essentially writes an IOU promising to pay back the investor $1,000 in three months. The investor does not receive any dividend payments during the time the T-bill is held. Instead, the investor receives the T-bill's appreciation ($20), or the difference between the discounted value she originally paid for the bill ($980) and the amount she receives back at its maturity ($1,000). The interest rate of a T-bill can be determined by dividing its appreciation by its discounted purchase price. For instance, if a T-bill appreciates by $20 during the three months it is held by an investor, who purchased the bill at a discounted rate of $980, the interest rate of the T-bill is 2% over three months ($20/$980 = 2%).

Treasury bills differ from Treasury notes and Treasury bonds. The differences among these three forms of government securities lie in the length of their maturity, the types of returns holders receive and the purposes for which these securities are held. Treasury notes are medium-term debt securities of the U.S. Treasury that have a fixed interest rate, a maturity period of one to ten years and pay interest every six months until maturity. Treasury bonds are long-term obligations of the U.S. Treasury that also have a fixed interest rate, but have a maturity period of more than 10 years and pay interest semiannually until maturity. Treasury notes and bonds are also issued with a minimum denomination of $1,000, and are considered some of the safest mid- to long-term investment options. Thus, unlike Treasury bills, which pay no direct interest but are bought at a discount and sold at full value, Treasury notes and Treasury bonds do pay interest at a fixed interest rate until their maturity date.

Every week, the Treasury Department auctions off new Treasury bills of varying maturities, ranging from one month to one year, with three-month and six-month T-bills being the most common. T-bills are considered very safe investments because they are backed by the full faith and credit of the U.S. Treasury. Because Treasury bills are short-term, low risk investments that are highly liquid, they are one of the most common forms of marketable securities. Companies invest in T-bills as a safe way to invest cash reserves for short periods of time.

Commercial Paper

Commercial paper is an unsecured, short-term promissory note that is issued by a corporation, typically for the purpose of meeting short-term liabilities. Commercial paper is an unsecured IOU that is not supported by any tangible collateral. Instead, it is a promise issued by a corporation that it will pay the holder a sum of money within a relatively short period of time. The maturity date on commercial paper rarely exceeds nine months, or 270 days, and is commonly set at 30 to 90 days. These debt securities are usually issued at a discount that typically tracks current market interest rates rather than paying a fixed interest rate. Hence, instead of the issuing corporation paying interest on the instrument while it is held, the holder receives the face value of the paper upon redemption, which is greater than its purchase price.

Commercial paper is most commonly purchased by large corporations with temporary surpluses of cash and issued by other commercial entities. By purchasing commercial paper, corporations are able to use their cash reserves to lend money to other commercial firms in return for IOUs that will mature with a higher return than the corporation might have received by depositing its funds into a bank savings account. However, because commercial paper is not usually backed by any collateral, only large corporations with high credit ratings are considered sufficiently safe entities to attract buyers to purchase their unsecured promissory notes at a discount rate.

Bankers' Acceptances

Bankers' acceptances are short-term investments that are promissory notes created by a company and guaranteed by a bank. When a bank "accepts" these instruments, the company promises to pay the bank the value of the bill and the bank promises to pay the holder the face amount at maturity. Bankers' acceptances are typically used when a company that is in need of short-term financing signs an order, or instruction to pay a set amount of money at a set date in the future to the bank. The order functions much like a postdated check. If a bank accepts the order, it agrees to pay the amount of the order to its holder, and thus the bank becomes liable for the acceptance and its creditworthiness, not the original company's, determines the risk of the acceptance. The bank can then simply hold the acceptance or sell it in the money markets. While a bank does not have to sell a bankers' acceptance, if it does do so, the acceptances are sold at a discount from their face value. This means that the bank sells the acceptances for less than their face value, and when the maturity date is reached, the company pays the issuing bank the value of the acceptance and the bank pays the ultimate holder of the acceptance its face value.

Bankers' acceptances can be a way for new companies with a good relationship with a bank, but with minimal credit established with its vendors, to purchase goods using the bank's credit rating instead its own. Because there is some risk, banks usually only accept orders from companies with which they have a satisfactory track record and banks charge a fee for their acceptance of the liability.

Money Market Instruments

The money market is the securities market that deals in short-term borrowing and lending of monetary instruments. Securities traded in the money market mature in 13 months or less. The money market should be contrasted with the capital market, where medium-term and long-term instruments and credits are traded. Trading in money markets takes place between banks in such money centers as New York, London, Chicago, Frankfurt, Hong Kong, Sydney and Mumbai.

Money market instruments are forms of debt that are traded in the money markets and that are highly liquid and mature in less than one year. Money market instruments include bankers' acceptances, commercial paper and Treasury bills, which are described above. However, other common money market instruments include the following:

• Certificates of Deposit: A time deposit with a specific maturity date shown on the certificate.
• Eurodollar Deposit: A deposit made in U.S. dollars at a bank or bank branch located outside the United States.
• Federal Agency Short-Term Securities: Short-term securities issued by government-sponsored agencies or enterprises such as the Farm Credit System, the Federal Home Loan Banks and the Federal National Mortgage Association.
• Municipal Notes: Short-term notes issued by municipalities in anticipation of tax receipts or other revenues.
• Repurchase Agreements: Short-term loans — normally for less than two weeks and frequently for one day — arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
• Money Market Mutual Funds: Pooled funds consisting of short-term, high quality investments that are used to buy money market securities on behalf of retail or institutional investors.

Although money markets trade both in the U.S. and around the world, the basic function of this market is to connect companies with surplus short-term funds that are is willing to lend their funds at an interest with companies that need to borrow short-term credit at an interest. Buyers and sellers are connected through middlemen, who facilitate the transaction for a profit. Thus, money markets allow for the rapid transfer of cash and marketable securities between buyers and sellers, who purchase and sell securities according to their individual needs and objectives.

Collateral Markets

Collateral markets came under scrutiny after the crash of AIG in 2008. These markets allow investors in the assets markets to finance short positions, that is, hedging. In a collateral market transaction, cash from a securities-backed transaction is used as collateral and reinvested rather than held. Aggresive investment of cash collateral may give rise to high-risk activity, especially where agent compensation is tied to returns but not losses. Nevertheless, collateral markets are an essential component of the asset markets, in particular the trading of Treasury bills and mortgage-backed securities.

Reasons Corporations Hold Marketable Securities

There are several reasons why corporations hold marketable securities. One reason is so that they can put a short-term surplus of cash to use and earn a higher interest rate than possible through collecting interest on a savings account. Another reason is that marketable securities are highly liquid, so companies can invest in these securities while retaining the confidence that they can be quickly converted back to cash if companies face a sudden need for funds. Also, marketable securities are an attractive investment option for companies because they require minimal management. These factors are discussed in more detail below.

Increased Interest Earnings

When marketable securities appear on a company's financial statement such as a balance sheet, they are listed as a current asset and they generally indicate that the company has made a short-term investment of its excess cash. Marketable securities typically earn a higher rate of return than banks pay for savings accounts, where companies generally hold cash reserves. This is because marketable securities may receive interest and dividend payments before their maturity date and may appreciate in value so that they may be sold for more than their purchase price. These benefits, coupled with the fact that marketable securities tend to be safe, low risk investments means that companies can use their cash reserves to invest in marketable securities and create even greater returns on their surplus with minimal risk of loss.

Liquidity of Securities Market

The securities market is usually quite liquid, meaning marketable securities can quickly and easily be converted, or sold for cash. Marketable securities, such as Treasury bills, bonds or stocks, are routinely and actively traded and thus have a reliable market value. When a company lists securities on its balance sheet, the securities are properly classified as marketable securities when the company can readily convert them into cash and it intends to do so when it needs additional cash resources. If either of these two tests for marketable securities does not apply, then the securities are considered to be investment in securities. Investment in securities differ from marketable securities in that investment in securities are securities held for long-term goals and are classified as long-term assets by a company, while marketable securities are held as a temporary investment are classified as current assets. The long-term nature of investment in securities results in these securities being generally less liquid. Thus, companies are less likely to hold investment in securities because they cannot be readily converted into cash, and more likely to hold marketable securities because of their liquidity.

Ease of Management of Investments

Management of marketable securities does not require ongoing operational decisions. Generally, a company simply holds marketable securities as a short-term investment, and thus the only decision that must be made regarding their administration is whether and when to buy or sell these securities. Once the decision is made to convert marketable securities into cash, this can be readily accomplished because of their liquidity, and the company can then use the cash as it sees fit.

Applications

How Corporations Report and Use Cash and Marketable Securities

Creating Accurate Balance Sheets

A balance sheet is the financial statement that reports the assets, liabilities and net worth of a company at a specific point in time. Assets represent the total resources of a company, which may shrink or increase depending on the results of operations. Assets are listed in the order of their liquidity, or the ease with which they may be converted into cash. Not only do companies distinguish between assets and liabilities, they further divide these two classifications into two categories: current and noncurrent.

Current assets, which are assets that can be convertible to cash within a year, include cash, accounts receivable, notes receivable, inventory, fixed assets and other miscellaneous assets. Cash refers to cash on hand or in banks, checking account balances, and other instruments such as checks or money orders. Marketable securities include Treasury bills, commercial paper, bankers' acceptances and other types of money market securities. Accounts receivable indicate sales made and billed to customers on credit terms, such as when a retailer lists its customer charge accounts that have been billed but are unpaid. Notes receivable represent a variety of obligations with terms coming due within a year, such as a retailer with an entry for merchandise sold on installment terms. Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business. Fixed assets are materials, goods, services and land used in the production of a company's goods, such as real estate, buildings, plant equipment, tools and machinery. Noncurrent assets are items a corporation cannot easily turn into cash and does not consume within a year, such as investments or advances to and receivable from a subsidiary company.

Liabilities represent what a company owes. Current liabilities are obligations that a business must pay within a year on a set of dates for recurring liabilities or on a specific date for one-time obligations, usually within 30 to 90 days of the purpose for which they arose. In order to meet their current liabilities, most companies keep sufficient cash reserves readily available to pay these obligations on time for a period of several months. The most common current liabilities listed on a company's balance sheet are accounts and notes payable, bank loans and other miscellaneous debts. Accounts payable represent merchandise and other materials that a company has purchased on credit but has not paid in full by the date of the balance sheet. Notes payable represent amounts that a company has borrowed from other companies or individuals. Other current liabilities may include wages and salaries that are due employees for time between the last payday and the date of the balance sheet, as well as taxes and other expense that are unpaid at the time the balance sheet is prepared. Noncurrent liabilities, also called long-term liabilities, are items that mature in excess of one year from the balance sheet date. Maturity dates, or the date that the payment is due, on these liabilities may run up to 20 or more years, as with a real estate mortgage.

The reason that companies create balance sheets is to get a clear indication of their financial standing at a particular point in time. Balance sheets are often created at the end of the year to establish the total inflow and outflow of resources within a company as well as to determine the net worth of a company's owners or founders. Each item on the balance sheet plays an important role in determining the true financial state of a company, and this is why even short-term assets, such as cash and marketable securities, are always included on a company's balance sheet.

Meeting Accounting Requirements

Companies must record any cash and marketable securities they hold, both for internal audit purposes and to comply with governmental financial reporting requirements, according to generally accepted accounting principles. Marketable securities are initially recorded by a company in its financial records at their acquisition cost, which includes the purchase price plus any commissions, taxes or other costs related to the acquisition of the security. However, the market value of these securities may rise or fall while they are held by a company. This results in a holding gain or loss that is not due to the normal operations of a firm. These gains or losses must be indicated on a company's financial records, as the purpose of balance sheets and other financial statements is to reflect an accurate estimation of the company's economic worth.

Accounting procedures regarding marketable securities can be complicated in that a company must decide whether to report these instruments at their acquisition cost or at market value, and if at market value, whether to report the changes as part of any period's income or to record the gain or loss in income in the period in which the company sells the securities. If a company decides to determine the valuation of marketable securities after their acquisition, these securities will fall into three different classifications. Debt held to maturity are debt securities that a company intends to hold for their full term, or until the securities mature. Trading securities are debt or equity securities a company intends to use in generating trading profits, and it is assumed these securities are held for short-term profit. Securities available for sale are debt or equity securities that are neither "trading" nor "held-to-maturity." They are securities that companies typically hold for a specific cash need, such as when a manufacturing firm builds a large fund of securities to pay for a renovation to its plant or to retire bonds that will come due.

Companies want to report their assets in a way that places their financial standing at that particular point in time in the best possible light, and this desire must be counterbalanced by the need of investors and corporate oversight bodies to have a true and fair indication of a company's financial assets and liabilities. Thus, companies must consider how to report the holdings of their assets, including cash and marketable securities, in a way that is most advantageous to them while being ethical and in compliance with the relevant accounting principles and governmental requirements.

Holding Reserves for Financial Transactions

Companies may hold cash and marketable securities in reserve to pay for significant transactions, such as a major purchase. For instance, a company may decide to build its reserves of liquid assets in anticipation of the purchase of land or a building. The company may decide to shift some long-term assets to more liquid assets, and thus may convert some of its assets to marketable securities. Marketable securities are attractive to companies that anticipate a significant outflow of cash because these securities generally pay a higher interest rate than cash savings accounts and yet are highly liquid so that they can be sold for cash in a very short period of time. Marketable securities allow a company to continue to earn interest on its pool of reserves without the entanglement of a long-term investment. In addition, most marketable securities, such as Treasury bills, are considered to be very safe, low-risk investments, which further enhances their viability as a top option for companies that are holding reserves of cash and liquid assets in anticipation of a significant financial transaction.

During the financial crisis following the crash of 2008, companies slowed or froze cash investments in development and expansion and "stockpiled" their cash reserves. New technologies and the Internet, however, allowed for real-time supply chain transactions. This more efficient approach cut banks out of the process, in many cases, and companies were able to use their own idle cash reserves to purchase their own receivables.

Conclusion

Cash and marketable securities represent the most common forms of a company's current assets. Companies keep cash reserves to pay for sudden expenses or to keep them viable during periods of financial losses. Businesses control their cash flow to regulate their financial needs by expediting their cash receipts and slowing down their disbursements. Companies hold marketable securities to receive a higher rate of return on these investments while taking advantage of the liquidity in the securities market and the fact that marketable securities require minimal ongoing management oversight. The most common forms of marketable securities held by companies include treasury bills, commercial paper, bankers' acceptances and other types of money market securities. Companies and financial analysts deal with marketable securities in many common business activities, such as creating accurate balance sheets, meeting accounting and financial reporting requirements and pooling reserves of cash and marketable securities to pay for a major financial transaction.

Terms & Concepts

Asset: A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

Balance Sheet: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.

Banker's Acceptance: A short-term credit investment created by a non-financial firm and guaranteed by a bank. Acceptances are traded at a discount from face value on the secondary market. Banker's acceptances are very similar to Treasury-bills and are often used in money market funds.

Broker: Assists in the buying and selling of financial securities by acting as a 'go-between' between buyer and seller to reduce search and information costs.

Capital Market: Where those raising finance can do so by selling financial investments to investors, e.g. bonds, shares.

Capital Structure: The proportion of a firm's capital that is equity or debt.

Cash: Legal tender or coins that can be used in the exchange of goods, debt, or services. Sometimes also including the value of assets that can be converted into cash immediately, as reported by a company.

Commercial Paper: An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities.

Government Security: A government debt obligation backed by the credit and taxing power of a country with very little risk of default. These include short-term Treasury bills, medium-term Treasury notes and long-term Treasury bonds.

Liability: A company's legal debts or obligations that arise during the course of business operations.

Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting the asset's price.

Long-Term Investments: An account on the asset side of a company's balance sheet that represents the investments that a company intends to hold for more than a year, such as stocks, bonds, real estate and cash.

Maturity Date: The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop.

Money Market: The securities market dealing in short-term debt and monetary instruments.

Money Market Instruments: Forms of debt that mature in less than one year and are very liquid.

Short-Term Investments: An account in the current assets section of a company's balance sheet that contains any investments that a company has made that will expire within one year. These accounts typically contain stocks and bonds that can be readily liquidated.

Treasury Bill: A short-term debt obligation backed by the U.S. government with a maturity of less than one year.

Treasury Bond: A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.

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Suggested Reading

Berg, A. (2006). Money's sordid tale of dirty floats, debasement and doom. Futures: News, Analysis & Strategies for Futures, Options & Derivatives Traders, 35, 72-74. Retrieved April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=22191681&site=ehost-live

O'Brien, E. (2005). Audit details N.Y. health corp. losses. Bond Buyer, 353(32210), 1- 40. Retrieved April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=18154574&site=ehost-live

Schadewald, M. (2006). Apportionment issues: Redemptions of short-term marketable securities: The Microsoft case. Journal of State Taxation, 25, 9-51. Retrieved April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=23858882&site=ehost-live