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Cash and Cash Equivalents appear in the Balance Sheet which showcases the value of a company’s assets that are cash or can be converted into cash immediately. Although, cash equivalents do not include the equity or stock holdings because they can fluctuate in the Market.
Cash and cash equivalents are the assets owned by the company, will be shown on the top of the balance sheet. Also, they are considered to be the most liquid of short-term assets.
Cash and cash equivalents help companies with their working Capital. These liquid assets are used to pay off the Current Liabilities that are short-term and bills.
Cash is a form of paper that includes coins and currency notes. A Demand Deposit is a type of account where the funds may be withdrawn at any time without notifying the institution.
Cash equivalents are the investment which can be converted into cash. The cash equivalents include Commercial Paper, treasury bills, short term government Bonds, marketable securities and money market holdings. The following are the criteria for the cash equivalent-
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In simple words, cash and cash equivalents are those assets which are immediately converted into cash. They are significant for the liquidity of a business. In case, if a company falls due, it should have sufficient cash and cash equivalents to meet its urgent liabilities.