Скачать или смотреть Cash and Cash Equivalents | Your Most Liquid Assets

Cash equivalents are listed on your balance sheet as an asset right below cash because cash is the most liquid investment that we have. But liquidity is the idea of how quickly something can be turned into cash. So the next most liquid asset that a company can have is what's called a cash equivalent. Now, when we're thinking about cash and cash equivalents and other types of financial instruments, a couple of things that we have to think about and consider is:
-What are the interest rates that we get on those different types of financial instruments
-What is the risk profile of that financial instrument

You know holding the stock of a really small startup company is a lot more risky than say holding a bond of the US government — which is pretty secure. We're pretty sure the government's going to be able to pay its debts over the long term, a small startup company maybe not so much. So there's the rate of return on the interest, there's the risk profile, and then there's also inflation. Now as a company is trying to make decisions between how much they're going to hold in cash, how much they're going to have in cash equivalents, how much they're going to have in other investments, they have to weigh all of these three different things.

Then we’ll walk you through why somebody would hold onto cash or why someone would not hold on to cash. We dive into the positives and negatives of having cash and cash equivalents and some options of what cash equivalents are.


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