Question

Give the meaning of ‘Cash Equivalents’ for the purpose of preparing Cash Flow Statement.

What is meant by ‘Cash Equivalent’ while preparing Cash Flow Statement?

Answer 1

Cash Equivalents are short-term, highly liquid investments that can be readily converted into cash and are subject to an insignificant risk of change in value. They are held for the purpose of meeting short-term cash commitments. A few of the examples of cash equivalents are treasury bills, commercial bills, call money, etc.