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Questions
Short Answer Question:
State the meaning of the term: Cash Equivalents
What is meant by Cash equivalents?
Short Answer
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Solution
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash and are subject to an insignificant risk of change in value. In other words, cash equivalents are held to meet short-term cash commitments rather than for investment or any other purpose. An investment for short-term maturity, say three months, can be regarded as a cash equivalent. Some examples of cash equivalents are treasury bills, commercial papers, etc.
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