Financial Reports: How to Read the Balance Sheet for Marketable Securities

By Lita Epstein

Marketable securities are a type of liquid asset on the balance sheet of a financial report, meaning they can easily be converted to cash. They include holdings such as stocks, bonds, and other securities that are bought and sold daily.

Securities that a company buys primarily as a place to hold on to assets until the company decides how to use the money for its operations or growth are considered trading securities. Marketable securities held as current assets fit in this category. A company must report these at their fair value based on the market value of the stock or bond on the day the company prepares its financial report.

A firm must report any unrealized losses or gains — changes in the value of a holding that it hasn’t sold — on marketable securities on its balance sheet to show the impact of those losses or gains on the company’s earnings. The amount you find on the balance sheet is the net marketable value, the book value of the securities adjusted for any gains or losses that haven’t been realized.

The balance sheet is the show for general consumption, but the notes to the financial statements are where you find the small print that most people don’t read. You find lots of juicy details in the notes that you don’t want to miss.