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John Moffat.
John Moffat.-
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complicated
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Hi tutor,
I’m struggling to explain the differences between the terms “marketability” and “liquidity” of shares. Are there any significant differences between these two terms? Hope to hear from you, thanks
John Moffat
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Marketability is a measure of the ability of a security to be bought and sold. If there is an active marketplace for a security, it has good marketability. Marketability is similar to liquidity, except that liquidity implies that the value of the security is maintained, whereas marketability simply indicates that the security can be bought and sold easily.
complicated
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Thank you for the quick response 🙂
If a company’s shares is said to have poor liquidity, does it mean that shares are difficult to sell, and prices of them may change easily?John Moffat
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It does mean that it is harder to sell (or buy) shares, but not that the price is likely to change – it is just that there are not many people dealing in the shares.
complicated
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But what can then be said about shares with poor marketability? Does poor marketability mean the same?
John Moffat
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Poor marketability means it is harder to sell the shares (because not many people are trading in them)
complicated
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OK, thank you 🙂
John Moffat
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You are welcome 🙂
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