ACA ICAEW Business Strategy and Technology Practice Exam 2025 - Free Practice Questions and Study Guide

Marketable securities are financial instruments that can be quickly and easily converted to cash, typically representing stocks, bonds, or other financial assets traded on markets. The statement that they are usually held for a short time frame accurately reflects their purpose and nature. Investors generally buy marketable securities intending to take advantage of price fluctuations or to ensure quick liquidity, making them suitable for both short-term investment strategies and cash management.

Holding marketable securities for a short time is characteristic of their liquid nature, as they are designed to be bought and sold in active markets, often within days or even hours. This contrasts with assets like real estate, which generally require significant time to sell and therefore provide lower liquidity.

The other choices present some inaccuracies: marketable securities can have fluctuating values based on market conditions, they are not risk-free as they are subject to market and credit risks, and they typically offer higher liquidity than real estate assets. Understanding the essence and proper alignment of marketable securities within a portfolio is crucial for making informed investment decisions.