Cash And Cash Equivalents - CCE

Loading the player...

What are 'Cash And Cash Equivalents - CCE'

Cash and cash equivalents refer to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately. These include bank accounts, marketable securities, commercial paper, Treasury bills and short-term government bonds with a maturity date of three months or less. Marketable securities and money market holdings are considered cash equivalents because they are liquid and not subject to material fluctuations in value.

BREAKING DOWN 'Cash And Cash Equivalents - CCE'

Cash and cash equivalents is a group of assets owned by a company. For simplicity, the total value of cash on hand is included with items with a similar nature to cash. If a company has cash or cash equivalents, the aggregate of these assets is always shown on the top line of the balance sheet. This is because cash and cash equivalents is the most liquid asset. All cash and cash equivalents must be current assets.

Cash

Cash is money in the form of currency. This includes all bills, coins and currency notes. A demand deposit is a type of account from which funds may be withdrawn at any time without having to notify the institution. Examples of demand deposit accounts include checking accounts and saving accounts. All currency balances as of the date of the financial statements of deposit accounts are included in cash totals.

Foreign Currency

Companies holding more than one currency experience currency exchange risk. Currency from foreign countries must be translated to the reporting currency for reporting purposes. The conversion should provide results comparable to those that would have occurred if the business completed operations using only one currency. Translation losses from the devaluation of foreign currency are not reported with cash and cash equivalents. These losses are reported in the financial reporting account called accumulated other comprehensive income.

What Is Defined as Cash Equivalent?

Cash equivalents are investments that can readily be converted into cash. The investment must be short-term, usually with a maximum investment duration of three months or less. If an investment matures in more than three months, it should be classified in the account named other investments. Cash equivalents should be highly liquid and easily sold on the market. The buyers of these investments should be easily accessible.

The dollar amounts of cash equivalents must be known. Therefore, all cash equivalents must have a known market price and should not be subject to price fluctuations. The value of the cash equivalents must not be expected to change significantly before redemption or maturity.

Examples of Cash Equivalents

Certificate of deposits may be considered a cash equivalent depending on the maturity date. Preferred shares of equity may be considered a cash equivalent if they are purchased shortly before the redemption date and not expected to experience material fluctuation in value.

RELATED TERMS
  1. Cash Position

    The amount of cash that a company, investment fund or bank has ...
  2. Cash Equivalents

    Investment securities that are short-term, have high credit quality ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  4. Current Assets

    A balance sheet account that represents the value of all assets ...
  5. Mutual Fund Cash Level

    The percentage of a mutual fund's total assets that are currently ...
  6. Net Cash

    A company's total cash minus total liabilities when discussing ...
Related Articles
  1. Markets

    What are Cash Equivalents?

    Cash equivalents are money market instruments.
  2. Markets

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  3. Markets

    Liquidity Measurement Ratios: Cash Ratio

    By Richard Loth (Contact | Biography)The cash ratio is an indicator of a company's liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash, cash ...
  4. Investing

    Understanding Short-Term Investments

    These are investments that have a maturity date of less than one year, or will be liquidated within a year.
  5. Investing

    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.
  6. Investing

    Understanding Financial Liquidity

    Understanding how this measure works in the market can help keep your finances afloat.
  7. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  8. Investing

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
  9. Investing

    Financial Statements: The System

    By David Harper (Contact David)Financial statements paint a picture of the transactions that flow through a business. Each transaction or exchange - for example, the sale of a product or the ...
  10. Investing

    Cash Flow Statement: Analyzing Cash Flow From Financing Activities

    The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
RELATED FAQS
  1. 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 >>
  2. What's the difference between short-term investments in marketable securities and ...

    Most of the time, when an investor or analyst searches through the financial statements of a publicly traded company, he ... Read Answer >>
  3. What are some alternative liquidity ratios to the cash ratio?

    Learn what the cash ratio measures, and understand what two other liquidity ratios can be used by a company to replace the ... 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. How can I calculate the cash ratio of a company in Excel?

    Find out more about the cash ratio, what the cash ratio measures and how to calculate a company's cash ratio using Microsoft ... Read Answer >>
  6. 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 >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center