CFA Practice Question

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CFA Practice Question

Under what condition would a firm report marketable securities as a long-term asset?

I. When funds are set aside for a specific long-term purpose such as plant expansion
II. When the value of a firm's investment in marketable securities is less than its cost
III. When a firm maintains excess trading securities
Correct Answer: I

A firm may maintain funds invested in marketable securities that are earmarked for plant expansion, sinking fund payments, or other long-term uses. In these situations many firms would report this portion of their cash or cash equivalents as long-term because these invested funds are not available in the daily operation of the business.

User Contributed Comments 1

User Comment
vatsal92 When marketable securities are held for long term purposes or capital investment purposes.
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