Question

Short-term highly liquid investments qualify as cash equivalents if they are realisable into known amounts of cash from the date of acquisition within a period of:

Hint:

Cash Equivalents = Highly liquid + Short maturity (typically 3 months or less from acquisition date) + Readily convertible to cash + Insignificant risk of value change.

Answer 1

Cash Equivalents

Short-term, highly liquid investments qualify as cash equivalents when they meet two key criteria:

• They must be readily convertible to known amounts of cash
• They must be subject to an insignificant risk of changes in value

Maturity Requirement: Typically, only investments with an original maturity of 3 months or less from the date of acquisition qualify as cash equivalents.