For an investment to qualify as a cash equivalent,it must be readily convertible to a known amount of cash and which of the following?
A)it must be identified as a cash equivalent on the income statement.
B)it must mature within 4 months.
C)the investment must have a known foreign exchange rate.
D)must be sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes.

Question

Quizplus · Accepted Answer

A cash equivalent must have a maturity date close enough that its market value is relatively insensitive to interest rate changes. This typically means it will mature within 3 months or less, but there is no specific requirement for it to mature within 4 months. The investment does not need to be identified as a cash equivalent on the income statement, but it does need to be readily convertible to a known amount of cash, and it may or may not have a known foreign exchange rate.

For an Investment to Qualify as a Cash Equivalent,it Must