Cash Equivalents

Cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash and carry little risk of significant changes in value. Companies usually report cash and cash equivalents together on the balance sheet.

Reviewed September 2026

Common examples

Depending on maturity and accounting treatment, examples can include Treasury bills, certain money-market instruments and very short-term deposits. An investment is not a cash equivalent merely because it is easy to sell.

Why maturity matters

Cash equivalents are intended to function almost like cash. That generally means a very short remaining maturity and low price risk. Longer-term bonds or volatile securities normally would not qualify.

Simple example

A business has $100,000 in its bank account and $50,000 in qualifying short-term Treasury bills purchased as a place to hold near-term cash. It may report $150,000 as cash and cash equivalents, subject to the applicable accounting rules.