ACCA ICAEW Business Strategy and Technology Practice Exam 2025 – Complete Test Prep Guide

Liquidity is a crucial factor for marketable securities primarily because it affects their ease of conversion to cash. Marketable securities are financial instruments that can be quickly and easily sold in the market. Liquidity refers to how easily and quickly an asset can be converted into cash without significantly impacting its price.

When investing in marketable securities, investors prioritize liquidity because it ensures they can access cash when needed, whether for operational expenses, seizing new investment opportunities, or responding to unforeseen financial obligations. High liquidity means that these securities can be sold rapidly and with less risk of price fluctuation, making them a safer choice for investors who may require quick access to funds.

In this context, while other factors like profitability, resale value, or tax implications may be relevant to the performance or attractiveness of an investment, the primary concern with marketable securities is their liquidity. This characteristic directly influences how effectively and efficiently an investor can manage their cash flow, which is essential for maintaining a healthy financial position.