Question

Which of the following is not part of Cash & Cash Equivalents?

(a) Inventories (c) Current Investments

(b) Short-term Deposits (d)Marketable Securities​

Answer 1

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What's Not Included in Cash Equivalents

Investments in liquid securities, such as stocks, bonds, and derivatives, are not included in cash and equivalents. Even though such assets may be easily turned into cash (typically with a three-day settlement period), they are still excluded.

Answer 2

Answer:

The correct answer is option (a) Inventories.

Explanation:

Cash and Cash equivalents-

• The line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately is known as cash and cash equivalents.
• Bank accounts and marketable securities such as commercial paper and short-term government bonds are examples of cash equivalents.
• Cash equivalents should have maturities of no more than three months.

Includes-

• Cash-

Cash is currency money, which includes all bills, coins, and currency notes. A demand deposit is a type of account that allows funds to be withdrawn at any time without notifying the institution.

• Cash Equivalent

Cash equivalents are investments that can be converted into cash quickly. The investment must be for a short period of time, typically three months or less.

Excludes-

• Collateral for Credit

Short-term debt instruments, such as Treasury bills, may be exempt if they are used as collateral for an outstanding loan or line of credit.

• Inventory

Inventory held by a company is not considered a cash equivalent because it cannot be easily converted to cash.

Hence, we can conclude that inventory is not a part of cash and cash equivalent as its conversion into  cash is not easy.

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