Anything liquid (able to be turned readily into cash) has to be marketable, but the reverse is not necessarily true. For example, a 100 percent controlling interest in a private company is generally marketable, but not liquid. Likewise, real estate is marketable yet illiquid because it takes time to turn a parcel of real estate into cash by selling it.
Accordingly, the term “marketable illiquid” should be considered with “liquid” and “nonmarketable” in the assessment of liquidity and marketability. Examples of the application of these terms would be:
- Public stock – liquid
- Controlling interest in a private company – marketable illiquid
- Minority interest in a private company – nonmarketable
- Real estate – marketable illiquid
- Machinery and equipment – marketable illiquid
Such labels should take into consideration the degree of marketability of the assets to account for situations such as “hot” markets. Conversely, nonmarketability does not assume the asset cannot be sold, only that it is usually difficult to do so under normal conditions.