Question

To be classified as a cash equivalent, an item must be readily convertible to a known amount of cash and have an original maturity to the investor of three months or more. True False

Answer 1

Answer:

False

Explanation:

Cash equivalents are assets that can be easily converted into cash, but in order for an asset to be considered a cash equivalent its cash conversion period (i.e. maturity) must be less than 3 months or 90 days. E.g. securities that mature in 9 months are current assets, but not cash cash equivalent.