Cash equivalents are securities that a. have maturity dates of 3 months or less. b. have maturity dates of at least 6 months. c. management intends to convert into cash within 1 year. d. management intends to convert into cash within the normal operating cycle.

Question

Eve Howell

Business

1 February, 06:01

Cash equivalents are securities that a. have maturity dates of 3 months or less. b. have maturity dates of at least 6 months. c. management intends to convert into cash within 1 year. d. management intends to convert into cash within the normal operating cycle.

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Answers (1)

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Alia Gallegos · Answer 1

a. have maturity dates of 3 months or less

Explanation:

Cash equivalents refer to those short term highly liquid security investments such as marketable securities like commercial papers which can be converted into cash within 90 days or 3 months.

Cash equivalents are characterized by their maturity period being 3 months or lesser.

Commercial papers and certificate of deposits maturing in less than 3 months constitute cash equivalents.

Two major characteristics of cash equivalents being, their maturity period being 3 months or lesser and their maturity value is not subject to fluctuations i. e it is known in advance.