Cash equivalent

A cash equivalent is a highly liquid investment having a maturity of three months or less. It should be at minimal risk of a change in value. Examples of cash equivalents are:

  • Certificates of deposit
  • Commercial paper
  • Marketable securities
  • Money market funds
  • Short-term government bonds
  • Treasury bills

To be classified as a cash equivalent, an item must be unrestricted, so that it is available for immediate use.

The cash and cash equivalents line item is stated first in the balance sheet, since line items are stated in their order of liquidity, and these assets are the most liquid of all assets.