Unformatted text preview: ethical. A ZBA
enables the firm to maximize the use of float on each check without altering the
float time of payments to its suppliers. Keeping all the firm’s cash in an interestearning account enables the firm to maximize earnings on its cash balances by
capturing the full float time on each check it writes. Investing in Marketable Securities
Marketable securities are short-term, interest-earning, money market instruments
that can easily be converted into cash.6 Marketable securities are classified as part
of the firm’s liquid assets. The firm uses them to earn a return on temporarily idle
funds. To be truly marketable, a security must have (1) a ready market in order to
minimize the amount of time required to convert it into cash, and (2) safety of
principal, which means that it experiences little or no loss in value over time.
The securities that are most commonly held as part of the firm’s marketablesecurities portfolio are divided into two groups: (1) government issues, which
have relatively low...
View Full Document