Cash equivalents are short-term investments that are highly liquid and can be quickly converted into cash. Examples of cash equivalents include money market funds, Treasury bills, and commercial paper.
Cash equivalents are short-term investments that are highly liquid and can be quickly converted into cash. They are typically used by companies to manage their short-term cash flow needs. Cash equivalents are investments that are considered to be as good as cash and can be easily converted into cash without any significant loss in value. Examples of cash equivalents include money market funds, Treasury bills, commercial paper, and certificates of deposit.
Cash equivalents are typically used by companies to manage their short-term cash flow needs. Companies may use cash equivalents to fund operations, pay bills, or purchase inventory. Cash equivalents are also used to manage liquidity risk, which is the risk that a company will not have enough cash to meet its obligations. Cash equivalents are also used to manage interest rate risk, which is the risk that changes in interest rates will adversely affect the value of a company’s investments.
Cash equivalents are generally considered to be low-risk investments. They are highly liquid and can be quickly converted into cash without any significant loss in value. However, cash equivalents are not risk-free. They are subject to market risk, which is the risk that the value of the investment will decline due to changes in market conditions. Additionally, cash equivalents are subject to inflation risk, which is the risk that the purchasing power of the investment will decline due to inflation.
Cash equivalents are an important part of a company’s investment portfolio. They provide a low-risk way to manage short-term cash flow needs and to manage liquidity and interest rate risk. However, cash equivalents are not risk-free and are subject to market and inflation risk.