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Cash Equivalents

Description:

Cash equivalents refer to highly liquid and short-term investments that are easily convertible into cash within a short period, typically three months or less. These are low-risk financial assets with a high degree of stability and are considered similar to cash due to their ability to be immediately used for transactions or meeting financial obligations.

Senses:

Noun - Financial Sense:

In the financial context, cash equivalents are assets held by a company that can be quickly converted into cash with minimal risk of value loss. These assets include Treasury bills, short-term government bonds, commercial paper, and money market funds.

Example: The company had invested a significant portion of its surplus funds in cash equivalents, ensuring liquidity for future needs.

Usages:

1. Popular Usage:

Cash equivalents are widely used by investors and businesses to preserve the value of their money while maintaining easy accessibility.

Example: As a conservative investor, John prefers to hold cash equivalents rather than riskier investment options.

2. Local Usage:

In local accounting regulations, cash equivalents may be defined specifically within a particular jurisdiction, taking into account the country's financial regulations and governing bodies.

Example: According to local accounting standards, time deposits with a maturity of three months or less are considered cash equivalents.

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