Financial securities that can be converted into cash at closing to their book value price are classified as_______________?
Correct answer: C. Cash equivalents
- A. Inventories
- B. Short-term investments
- C. Cash equivalents
- D. Long-term investments
Explanation
Cash equivalents are short-term, highly liquid securities that can quickly be converted into a known cash amount with minimal risk of value change. Inventories and long-term investments do not meet this liquidity test.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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