Cash and Cash Equivalents

Question 1

Define Cash and Cash Equivalents

Answer 1

Cash and Cash Equivalents refers to a company’s most liquid assets, including cash on hand and highly liquid investments that can be easily converted into cash, such as short-term treasury bills. Cash equivalents typically have a maturity of 90 days or less.

Question 2

Examples of Cash Equivalents

Answer 2

Money Market Accounts
US Treasury Bills
Commercial Paper
CD’s with Short Term Maturities
Short Term Government Bonds

Question 3

Short Term Investments are classified as an short term investment when?

Answer 3

When the original maturity is over 90 days.

Question 4

Marketable equity and debt securities are classified as

Answer 4

Investments on the Balance Sheet

Question 5

If you have a negative cash balance, when is it classified as a liability?

Answer 5

Balance totals for different banks must be accounted for separately on the balance sheet. When one has a consolidated negative balance in the same bank, it must be accounted for separately has a negative balance.