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May 31, 2024 · Cash and cash equivalents are a line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately. Cash equivalents include...
Cash and cash equivalents are the most liquid assets, helping businesses pay bills and manage finances easily. Cash includes physical money and bank account balances, while cash equivalents are short-term investments easily converted to cash.
Cash is often reported within the asset category called cash equivalents. Cash equivalents are short-term, highly liquid assets that can readily be converted into known amounts of cash and with little risk of price fluctuations.
Source: Amazon Investor Relations. Cash and cash equivalents differ from other current assets, like marketable securities and accounts receivable, based on their nature. However, certain marketable securities may be classified as cash equivalents, depending on the accounting policy of a company.
Cash Equivalents: Cash equivalents encompass short-term, highly liquid investments that are easily convertible to a known amount of cash and have an insignificant risk of changes in value. These investments typically have a maturity period of three months or less from the date of purchase.
Cash equivalents are highly liquid. Marketable securities are fairly liquid, but not as liquid as cash equivalents because selling stocks and other marketable securities in a hurry may adversely affect the price (imagine taking money out of savings to pay for an emergency expense like a broken tooth versus trying to sell your car).
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Jun 8, 2023 · Cash equivalents are highly liquid investments that can be converted into cash easily. However, cash is currency on hand or in banks, including notes and coins, checking accounts, savings accounts, money market funds, etc.