CASH EQUIVALENT Meaning and
Definition
-
Cash equivalent refers to a highly liquid and virtually risk-free financial instrument, or an asset that can be readily converted into cash within a short period of time. It is considered as "equivalent" to cash due to its high liquidity and stability.
Typically, cash equivalents include short-term investments that have a maturity period of less than three months when purchased. These may include Treasury Bills, Certificates of Deposit (CDs), money market instruments, or highly liquid commercial paper. They are easily exchangeable for cash without any significant loss in value.
The purpose of cash equivalents is to provide investors and businesses with a safe and easily accessible form of investment or asset that can be readily converted into cash when needed. These investments act as a temporary parking spot for excess cash that can be quickly utilized for various purposes such as paying off debts, making immediate purchases, or meeting short-term financial obligations.
Furthermore, cash equivalents allow investors to mitigate liquidity risks, providing a safe haven during times of market uncertainty. They are often desirable due to their low risk factor and minimal potential for loss, making them an attractive option for individuals or businesses seeking a secure place to hold their funds temporarily.
In summary, a cash equivalent refers to a highly liquid and low-risk asset that can be quickly converted into cash, providing investors with immediate access to funds when needed and serving as a safe investment option.
Common Misspellings for CASH EQUIVALENT
- xash equivalent
- vash equivalent
- fash equivalent
- dash equivalent
- czsh equivalent
- cssh equivalent
- cwsh equivalent
- cqsh equivalent
- caah equivalent
- cazh equivalent
- caxh equivalent
- cadh equivalent
- caeh equivalent
- cawh equivalent
- casg equivalent
- casb equivalent
- casn equivalent
- casj equivalent
- casu equivalent
- casy equivalent
Etymology of CASH EQUIVALENT
The word "cash" has Middle French origins, derived from the Old Italian "cassa", meaning "box" or "chest". It referred to money stored in a container or strongbox.
The term "equivalent" comes from the Late Latin word "aequivalens", meaning "equivalent", which is a combination of "aequi-" (meaning "equal") and "valens" (meaning "valuable" or "worthy").
When these two words are combined, "cash equivalent" is formed, referring to an item or asset that can be easily converted or exchanged for cash and considered of equal value.
Infographic
Add the infographic to your website:
