Cash

Loading the player...

What is 'Cash'

Cash is legal tender or coins that can be used to exchange goods, debt or services. Sometimes it also includes the value of assets that can be converted into cash immediately, as reported by a company.

BREAKING DOWN 'Cash'

Cash is also known as money, in physical form. Cash usually includes bank accounts and marketable securities, such as government bonds and banker's acceptances. Although cash typically refers to money in hand, the term can also be used to indicate money in banking accounts, checks or any other form of currency that is easily accessible and can be quickly turned into physical cash.

Cash in its physical form is the simplest, most broadly accepted and reliable form of payment, which is why many businesses only accept cash. Checks can bounce and credit cards can be declined, but cash in hand requires no extra processing. However, it's become less common for people to carry cash with them, due to the increasing reliance on electronic banking and payment systems.

In finance and banking, cash indicates the company's current assets, or any assets that can be turned into cash within one year. A business's cash flow shows the net amount of cash a company has, after factoring in both incoming and outgoing cash and assets, and can be a good resource for potential investors. A company's cash flow statement shows all incoming cash, such as revenue, and all outgoing cash, used to pay expenses such as equipment and investments. To learn more about cash flow, what it means for businesses and how companies utilize cash, see Analyze Cash Flow the Easy Way.

Historical forms of Cash

Cash has been used as long as goods and services have been traded, and its form depends on the culture in which it operates. Many civilizations over the last four thousand years used coins struck from precious metals including copper, bronze (an alloy of copper and tin) silver and gold as cash, though other civilizations used sea shells or commodities of weight, including salt and sugar.

In modern times cash has consisted of coins, whose metallic value is negligible, or paper. This modern form of cash is fiat currency.

Paper money is a more recent form of cash, dating back to around the eighteenth century, and its value is set by its users' faith in the government backing the currency. This ability to determine price has extensive effects on an economy. It can affect inflation, or the rate at which prices rise for goods and services. The more prices are inflated, the less purchasing power each paper note or coin holds. Inflation can cause all kinds of problems for an economy that doesn't yet understand the concept; in general, it's good practice to keep inflation to a minimum and avoid deflation entirely. Deflation is the opposite of inflation, the lowering of prices, and often leads to economic depressions.

The advent of checks, debit cards, credit cards, and (most recently) online banking has decreased the need for people to carry cash in any form.

RELATED TERMS
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Net Cash

    A company's total cash minus total liabilities when discussing ...
  3. Cash Position

    The amount of cash that a company, investment fund or bank has ...
  4. Cash Is King

    The belief that money (cash) is more valuable than any other ...
  5. Trading Below Cash

    When a company's total share value is less than its cash minus ...
  6. Cash Flow From Financing Activities

    A category in the cash flow statement that accounts for external ...
Related Articles
  1. Markets

    Fundamental Analysis: The Cash Flow Statement

    By Ben McClureThe cash flow statement shows how much cash comes in and goes out of the company over the quarter or the year. At first glance, that sounds a lot like the income statement in that ...
  2. Economics

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  3. Investing Basics

    Calculating Net Cash

    A company’s net cash is its total cash remaining after it subtracts all liabilities.
  4. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  5. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  6. Term

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
  7. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  8. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  9. Professionals

    Cash Flow

    Learn all about the cash flow statement.
  10. Fundamental Analysis

    Cash Flow From Investing

    Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
RELATED FAQS
  1. How can you use a cash flow statement to make a budget?

    Understand how a cash flow statement can be used to create a company budget. Learn the difference between a cash budget and ... Read Answer >>
  2. How is cash flow from operating activities calculated?

    Discover why cash flow from operating activities is significant to businesses, and learn the direct and indirect methods ... Read Answer >>
  3. What is the difference between cash flow and revenue?

    Understand the difference between cash flow and revenue as they relate to corporate accounting and the financial evaluation ... Read Answer >>
  4. How do I determine cash flow investing activities for a publicly traded company?

    Learn how cash flows from investing activities are calculated, which sources and uses of cash are included in this section, ... Read Answer >>
  5. What is the difference between cash flow and free cash flow?

    Learn about the main differences between cash flow and free cash flow. In addition to the differences, learn how to calculate ... Read Answer >>
  6. Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center