Published Jan 25, 2023 Cash and Cash Equivalents (CCE) are short-term, highly liquid assets that are cash or can be converted into cash quickly. That means they are assets that can be easily converted into cash without any significant loss in value or time. Examples of CCE include cash, bank deposits, marketable securities, and short-term government bonds (usually with a maturity of 3 months or less). To illustrate this, let’s look at an imaginary company that has USD 1 million in cash. This money can be used to pay for short-term expenses, such as payroll, rent, and other operating costs. In addition to that, the company can also use it to invest in new projects or to pay off debt. Now, let’s assume the company invests USD 500,000 of its cash in a short-term government bond. This bond matures in three months and pays a 5% interest rate. That means the company will receive USD 6,250 in interest payments over the course of the three months. However, it still has USD 500,000 in CCE that can be used to pay for short-term expenses. The reason for this is that there is an active market for the government bond, which means it can quickly and easily be converted back to cash without a significant loss of value. Cash and Cash Equivalents are an important part of any company’s financial strategy. They provide a company with the liquidity it needs to pay for short-term expenses and to invest in new projects. In addition to that, CCE can also be used to pay off debt or to buy back shares. Thus, CCE are an important part of any company’s financial planning and should be managed carefully.Definition of Cash and Cash Equivalents (CCE)
Example
Why Cash and Cash Equivalents Matter
Financial Economics