Cash and Cash Equivalents

Cash and cash equivalents are short-term assets classified under current assets on a company's balance sheet. They are highly liquid, meaning they can be quickly converted into cash. The term consists of two components:1. Cash: This includes money such as cash holdings in a bank account, petty cash, and other readily available funds.2. Cash Equivalents: These are short-term, highly liquid investments like Treasury bills (T-bills), commercial paper, and other assets that can be easily converted into cash within a short period, usually three months or less. Together, they represent the most liquid assets a business holds.