Cash Equivalent (Noun)
Meaning
A highly liquid debt instrument with maturities of less than three months.
Classification
Nouns denoting possession and transfer of possession.
Examples
- High-yield savings accounts are often considered a cash equivalent for investors seeking low-risk, short-term investments.
- Treasury bills with maturities of one month are a classic example of a cash equivalent in the financial world.
- Money market funds typically invest in highly liquid, low-risk instruments that are considered cash equivalents.
- Commercial paper with a maturity of two weeks is another cash equivalent used by companies to manage their short-term financial needs.
- Certificates of deposit with maturities of less than three months are also considered cash equivalents by many investors and financial institutions.