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10 facts about CASH & CASH EQUIVALENTS in the Balance Sheet

Updated: May 28, 2023




1 → CASH AND CASH EQUIVALENTS are assets that can be readily converted into cash within a short period, typically three months or less


2 → They are reported under the CURRENT ASSETS section of the balance sheet


3 → Cash includes PHYSICAL CURRENCY, such as banknotes and coins, held by a company


4 → CASH EQUIVALENTS are highly liquid investments with a short maturity period, typically 90 days or less from the date of purchase


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5 → Examples of CASH EQUIVALENTS include TREASURY BILLS, COMMERCIAL PAPER and MONEY MARKET FUNDS


6 → CASH AND CASH EQUIVALENTS serve as a measure of a company's liquidity and its ability to meet short-term obligations


7 → They are usually the most LIQUID ASSETS a company holds


8 → The balance of CASH AND CASH EQUIVALENTS can fluctuate over time due to cash inflows and outflows from various business activities


9 → CASH AND CASH EQUIVALENTS are typically recorded at their FACE VALUE, which is the amount printed on the currency or the stated value of the investment


10 → Companies may restrict the use of CASH AND CASH EQUIVALENTS for specific purposes, such as maintaining minimum cash balances or for certain investment

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