The short term deposits are ________. (Fill in the blank by choosing correct option)
1) net cash
2) cash equivalent
3) cash flow
4) cash outflow
Answers
Answer: Cash equivalent
Explanation: The short term deposits are Cash equivalent.
Cash equivalents refers to short term commitment having a maturity anywhere between 3 months or less. It is a highly liquid investment.
Following are some of the examples of cash equivalents :
Bankers’ acceptances
Commercial paper
Certificates of deposit
Money market funds
Marketable securities
Short-term government bonds
Treasury bills
An investment is called a cash equivalent when it carries a short period of maturity of three months or less and which can be included in the cash equivalents and cash balance from the period of acquisition when it carries a very less risk of changes in the value of the asset .
An investment which carries a maturity period of more than 90 days is not referred as cash and cash equivalents
Hope this helps..