What do cash equivalents include?
Cash equivalents include short-term (no more than 90 days) engagements “with temporarily idle cash and easily convertible into a known cash amount”. For example, there are such items as money market funds, commercial paper, treasury bills, marketable securities, and short-term government bonds.
Cash and cash equivalents (CCE) is an element of the balance sheet which is, in other words, a business’s statement of financial position. Precisely speaking, it is a line item that states a current amount of a company’s cash and other assets that are ready to be converted into cash. The balance sheet lists the items that can be defined as the current assets. The two main criteria for falling into a category of a cash equivalent are as follows:
- An asset must be able to be converted into a precise amount of cash immediately;
- An asset must be so close to its maturity date (the date on that a debt is to be fully paid), as to minimize a risk that some changes in value appear by the time of the maturity date as a consequence of alterations in interest rates.
The information about cash and cash equivalents is used from time to time by analysts to compare a company’s present liabilities in order to evaluate the ability to pay its current bills in a short time. Nevertheless, such this analysis may be inaccurate, providing some items are ready to be converted into cash in a couple of days. In case of any questions or complicated situations, the best advice is to consult with the auditors of a company.
"What do cash equivalents include?" Custom-Writing, 12 Apr. 2020, custom-writing.org/qna/what-do-cash-equivalents-include/.
1. Custom-Writing.org. "What do cash equivalents include?" April 12, 2020. https://custom-writing.org/qna/what-do-cash-equivalents-include/.
Custom-Writing.org. "What do cash equivalents include?" April 12, 2020. https://custom-writing.org/qna/what-do-cash-equivalents-include/.
Custom-Writing.org. 2020. "What do cash equivalents include?" April 12, 2020. https://custom-writing.org/qna/what-do-cash-equivalents-include/.
Custom-Writing.org. (2020, April 12). What do cash equivalents include? Retrieved from https://custom-writing.org/qna/what-do-cash-equivalents-include/
Custom-Writing.org. (2020) 'What do cash equivalents include'. 12 April.