Cash and Cash Equivalents
Understanding Cash and Cash Equivalents
Cash includes currency, demand deposits, and other funds available for immediate use. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and have original maturities of three months or less.
Tip
Always check the original maturity of an investment when deciding whether it qualifies as a cash equivalent.
Summary
Cash equivalents are highly liquid investments with original maturities of three months or less.