M1 - Cash & Cash Equivalents

Question 1

Definition of Cash

Answer 1

Actual Unrestricted Cash, in both currency and demand deposits with banks and/or other financial institutions.

Question 2

Definition of Cash Equivalents

Answer 2

Short-term, liquid investments that are so near maturity (original maturity date was within three months of the purchase date) that the risk of changes in the value because of interest rate changes is insignificant.

Question 3

When they give a question and give you the book balance what are things you will mess with and won’t mess with:

Answer 3

Will Mess With :

1. Bank Service Charges
2. NSF Checks (Insufficient Funds)
3. Errors

Won’t Mess With: (only mess with when they give you the bank statement balance)

1. Checks Outstanding
2. Deposits in transit