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Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----
- a)Cash at Bank
- b)Non-current Investment
- c)Cash Equivalents
- d)Non-current Assets
Correct answer is option 'C'. Can you explain this answer?
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Short –term highly liquid investments which are readily converti...
Short term investments which can be converted into cash in a very short period of time is treated as cash equivalents.
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Short –term highly liquid investments which are readily converti...
Ans: (1)...CASH EQUIVALENT is a highly LIQUID INVESTMENT having a maturity of three months or less. It should be at minimal risk of a change in value. Examples of cash equivalents are: CERTIFICATES of DEPOSIT. Commercial paper.
(2)...The term cash and cash equivalents includes: currency, coins, checks received but not yet deposited, checking accounts, petty cash, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase such as U.S. treasury bills etc.
(2)...The term cash and cash equivalents includes: currency, coins, checks received but not yet deposited, checking accounts, petty cash, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase such as U.S. treasury bills etc.
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Short –term highly liquid investments which are readily converti...
Definition of Cash Equivalents
Cash equivalents are short-term investments that are highly liquid, meaning they can be easily converted into cash within a short time frame, typically three months or less.
Key Characteristics of Cash Equivalents
- Liquidity: Cash equivalents can be quickly and easily converted into cash without significant loss of value.
- Short-term Nature: These investments are held for a short duration, usually less than three months.
- Insignificant Risk: They are subject to minimal risk of value fluctuation, making them a safe investment choice.
Examples of Cash Equivalents
- Treasury Bills: Government securities with short maturities.
- Money Market Funds: Investment funds that invest in short-term, high-quality investments.
- Commercial Paper: Unsecured, short-term debt instruments issued by corporations.
Importance in Financial Management
- Liquidity Management: Cash equivalents are vital for companies to manage their liquidity effectively, ensuring they can meet short-term obligations.
- Financial Reporting: In financial statements, cash and cash equivalents are reported together, providing a clear picture of a company's liquid assets.
Conclusion
In summary, cash equivalents are essential for businesses and individuals alike, providing a balance between accessibility and security. They are distinct from cash at bank, non-current investments, and non-current assets, making option 'C' the correct answer to the question. Thus, understanding cash equivalents is crucial for effective financial planning and management.
Cash equivalents are short-term investments that are highly liquid, meaning they can be easily converted into cash within a short time frame, typically three months or less.
Key Characteristics of Cash Equivalents
- Liquidity: Cash equivalents can be quickly and easily converted into cash without significant loss of value.
- Short-term Nature: These investments are held for a short duration, usually less than three months.
- Insignificant Risk: They are subject to minimal risk of value fluctuation, making them a safe investment choice.
Examples of Cash Equivalents
- Treasury Bills: Government securities with short maturities.
- Money Market Funds: Investment funds that invest in short-term, high-quality investments.
- Commercial Paper: Unsecured, short-term debt instruments issued by corporations.
Importance in Financial Management
- Liquidity Management: Cash equivalents are vital for companies to manage their liquidity effectively, ensuring they can meet short-term obligations.
- Financial Reporting: In financial statements, cash and cash equivalents are reported together, providing a clear picture of a company's liquid assets.
Conclusion
In summary, cash equivalents are essential for businesses and individuals alike, providing a balance between accessibility and security. They are distinct from cash at bank, non-current investments, and non-current assets, making option 'C' the correct answer to the question. Thus, understanding cash equivalents is crucial for effective financial planning and management.
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Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer?
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Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer?.
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Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of Short –term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called -----a)Cash at Bankb)Non-current Investmentc)Cash Equivalentsd)Non-current AssetsCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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