Question

What is meant by $'Cash Equivalents ' While preparing Cash Flow Statement?

Answer 1

Cash Equivalents are short-term highly liquid investments that are easily convertible into cash and which are subject to an significant risk of change in value.

In other words, cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or any other purpose.

An investment held for short-term maturity say three months, can be regarded as cash equivalent. For Example Treasury Bills, Commercial Papers etc.