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Marketability vs liquidity of shares

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Marketability vs liquidity of shares

  • This topic has 7 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • September 1, 2016 at 10:40 am #336755
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    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

    September 1, 2016 at 12:06 pm #336785
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

    September 1, 2016 at 1:57 pm #336831
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    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?

    September 1, 2016 at 7:00 pm #336885
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

    September 1, 2016 at 11:58 pm #336939
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    But what can then be said about shares with poor marketability? Does poor marketability mean the same?

    September 2, 2016 at 6:41 am #336967
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Poor marketability means it is harder to sell the shares (because not many people are trading in them)

    September 2, 2016 at 9:18 am #337016
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    OK, thank you 🙂

    September 2, 2016 at 12:16 pm #337055
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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