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A firm carries cash and cash equivalents to pay its shorter-term charges but to also preserve money for long-time period cash deployment.
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Cash equivalents are brief-term investments which might be effortlessly liquidated, carry lower possibility of loss, and have Lively marketplaces to guarantee swift transacting. These instruments can easily be transformed to cash but are classified differently given that they aren't true statements of possession of cash.
Cash vs. Cash Equivalents Although the equilibrium sheet account groups cash and cash equivalents collectively, There are several noteworthy variances between the two types of accounts.
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