Question

Cash equivalents are short-term investments that a company invests in to increase earnings. true or false

Cash equivalents are short-term investments that a company invests in to increase earnings.

true or false

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Answer #1

Answer:

FALSE

Explanation:

Cash equivalent refers to those current assets which can be converted into cash immediately. Cash equivalents can be converted into ready cash within a period of ninety (90) days.

The purpose of cash equivalents is not to increase earnings. Instead, to provide the liquidity to the company.

Cash equivalents include marketable securities.

Hence, the given statement in the question is incorrect.

In case of any doubt or clarification, feel free to come back via comments.

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