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.