A cash equivalent is a current asset that:
A) will be converted to cash within one year.
B) will be converted to cash within one month.
C) is readily convertible into cash with a minimal risk.
D)is readily convertible into cash with a substantial risk.
E) none of the above.

Question

Quizplus · Accepted Answer

A cash equivalent is a short-term investment that can be quickly and easily converted to cash without a significant risk of loss. Examples include Treasury bills, commercial paper, and money market funds. The time frame for conversion to cash can vary, but it is generally expected to be within three months. Choice A and B are too specific in their time frames, and choice D implies a higher risk than what is characteristic of a cash equivalent.

A Cash Equivalent Is a Current Asset That