When managing a company's cash position, management may invest in securities that can easily be converted back into cash.The ability to turn an investment back into cash is known as:

Question

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The ability to turn an investment back into cash is known as liquidity. Therefore, the best choice is A. Solvency refers to a company's ability to pay its long-term debts, while cash equivalents are short-term, highly liquid investments that can be easily converted into cash. Compensating balances refer to minimum balances that a bank may require a company to maintain in order to receive certain services.

When Managing a Company's Cash Position, Management May Invest in Securities