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LeoGlossary: Cash Equivalent
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The term cash equivalent applies to any short term investment asset with a maturity of 90 days or less.
When talking about cash, we are dealing with the most liquid asset. Accounting treats it in such a way.
Cash equivalents are designed to be the next layer. While not as liquid as cash, they are short-term and can be converted into cash rather easily.
A corporation's balance sheet will reveal a lot if there is a fair bit of cash and cash equivalents. This means the likelihood is strong that the company can meet its near term expenses.
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