Cash equivalents maturing within three months are highly liquid, low-risk, short-term investments easily converted into known amounts of cash. Common examples include U.S. Treasury bills, bank certificates of deposit (CDs), commercial paper, money market funds, and short-term government bonds.
The assets considered as cash equivalents are those that can generally be liquidated in less than 90 days, or 3 months, under U.S. GAAP and IFRS. The two primary criteria for classification as a cash equivalent are as follows: Readily Convertible into Cash On-Hand with Relatively Known Value (i.e. Low-Risk)
An investment normally counts as a cash equivalent when it has a short maturity period of 90 days or less, and can be included in the cash and cash equivalents balance from the date of acquisition when it carries an insignificant risk of changes in the asset value.
Examples of Cash Equivalents
b Cash Equivalent/Short Term Investment Accounts. A cash equivalent investment is a highly liquid investment having a maturity of three months or less. It should be at minimal risk of a change in value.
Best short-term investments
Cash equivalents, since are short term in nature and there should not be many fluctuations, the instruments should be of least to insignificant risk and should be readily convertible to cash. Hence, mostly all investments that qualify as cash equivalents have a maturity of less than three months.
Government bonds, money market funds, and commercial paper are common types of cash equivalents. Assets like inventory and accounts receivable are not considered cash equivalents.
The 7 common current assets are Cash & Equivalents, Marketable Securities, Accounts Receivable, Inventory, Operating Supplies, Prepaid Expenses, and Other Liquid Assets, representing items easily converted to cash (within a year) for short-term operations, crucial for liquidity.
The term deposits with original maturity of three months or less from the date of acquisition should only be classified as 'cash and cash equivalents' and those with more than three months to 12 months maturity should be classified as 'Other bank balances'.
The "15-15 rule" primarily refers to treating low blood sugar (hypoglycemia) by consuming 15 grams of fast-acting carbohydrates, waiting 15 minutes, and then rechecking blood sugar; repeat if still low, then follow with a balanced snack. Less commonly, it can refer to an investment principle: investing ₹15,000 monthly in a mutual fund at a 15% return for 15 years to potentially become a crorepati (millionaire).
The maturity date marks the end of a financial agreement when a debt's principal and interest are due. And the term doesn't only apply to closed-end credit, it also applies to certain investments that accrue interest for a set period, like a certificate of deposit (CD).
For example, both a three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months.
Any single cash deposit, withdrawal, or multiple related transactions totaling over $10,000 in a business day must be reported to the IRS by financial institutions (via FinCEN Form 112) or businesses (via IRS Form 8300), but even smaller deposits adding up to over $10,000 (structuring) are illegal and reportable as suspicious activity. The key threshold is $10,000, but suspicious activity over $5,000 can also trigger reports.
Research indicates that the median cash conversion cycle is between 30 days and around 45 days. Aiming to reduce your cash cycle to 45 days or less would mean you turn cash into inventory and back again quicker than the average business.
Examples of cash equivalents include money market instruments, treasury bills, short-term government bonds, marketable securities, and commercial paper. They mature within three months compared to short-term investments that mature in 12 months and long-term investments that mature in over 12 months.
Cash equivalents should be measured at maturity value, meaning face value plus interest.
A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part of the Cash account balance until the date of the check.
Examples of cash equivalents include bank certificates of deposit, banker's acceptances, Treasury bills, commercial paper, and other money-market instruments. To be considered a cash equivalent, it needs to be highly liquid, redeemable upon demand, or able to be quickly converted into cash.
Overview: Best short-term investments in 2026
Liquid assets are assets that can be converted into cash easily and are useful for short-term financial needs. They also act as emergency funds and are useful in times of financial crises. Some of the examples of liquid assets are cash and cash equivalents, mutual funds, bonds, and, in some cases, accounts receivable.
Here are some well-known Short-Term Investments in India: