Question

Cash equivalents are securities that a.have maturity dates of 3 months or less. b.have maturity dates of at least 6 months. c.management intends to convert into cash within 1 year. d.management intends to convert into cash within the normal operating cycle.

Answer 1

Answer:

a. have maturity dates of 3 months or less

Explanation:

Cash equivalents refer to those short term highly liquid security investments such as marketable securities like commercial papers which can be converted into cash within 90 days or 3 months.

Cash equivalents are characterized by their maturity period being 3 months or lesser.

Commercial papers and certificate of deposits maturing in less than 3 months constitute cash equivalents.

Two major characteristics of cash equivalents being, their maturity period being 3 months or lesser and their maturity value is not subject to fluctuations i.e it is known in advance.