Cash equivalents
- highly-liquid investments with original maturities of 3 months or less
- us treasury bonds that mature in 1 year accounts receivable notes receivable
What are cash equivalents used for?
- Cash equivalents are investment instruments with good credit quality and high liquidity that are designed for short-term investing.
- Along with stocks and bonds, cash equivalents, usually referred to as "cash and equivalents," is one of the three major asset classes in financial investment.
- Cash equivalents can take several forms, for instance: US Treasury notes. US Treasury bills. Business paper.
- The balance sheet's current assets section includes cash and cash equivalents, which go toward a company's net working capital. Current assets less current liabilities equals net working capital.
- Numerous liquidity metrics are calculated using these cash equivalents: Current Liabilities divided by Cash Equals Cash Ratio. Current Assets / Current Liabilities equals the current ratio. (Cash & Equivalents + A/R) / Current Liabilities is the quick ratio.
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