Which of the following pertaining to cash equivalents is false? Multiple Choice<\/p>\n\n\n\n
They include long-term investments.
They must usually be within three months of their due date.
They are readily convertible to a known cash amount.
They are close enough to their due date so that their market value will not greatly change.
They include short-term U.S. treasury bills.<\/p>\n\n\n\n
The Correct Answer and Explanation is<\/mark><\/strong>:<\/p>\n\n\n\n Correct Answer: They include long-term investments.<\/strong> Cash equivalents are short-term, highly liquid investments<\/strong> that are easily convertible to known amounts of cash and are subject to an insignificant risk of changes in value<\/strong>. These are reported with cash on a company\u2019s balance sheet because they are nearly as liquid and secure as actual currency. Let’s break down the key characteristics to explain why the statement \u201cThey include long-term investments\u201d is false.<\/p>\n\n\n\n The statement “They include long-term investments”<\/strong> is incorrect because long-term investments<\/strong> are not cash equivalents. These include stocks, bonds, real estate<\/strong>, or other investments that a company plans to hold for more than one year<\/strong>. They are subject to greater market risk and are not readily convertible to cash within a short time frame. Thus, they do not meet the criteria<\/strong> for cash equivalents.<\/p>\n\n\n\n Among the options listed, the false statement is the one that includes long-term investments<\/strong> in the definition of cash equivalents. This mischaracterization violates the basic principles of liquidity, stability, and short-term nature essential to the definition of cash equivalents.<\/p>\n","protected":false},"excerpt":{"rendered":" Which of the following pertaining to cash equivalents is false? Multiple Choice They include long-term investments.They must usually be within three months of their due date.They are readily convertible to a known cash amount.They are close enough to their due date so that their market value will not greatly change.They include short-term U.S. treasury bills. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-212148","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/212148","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=212148"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/212148\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=212148"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=212148"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=212148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
(This statement is false<\/strong> about cash equivalents.)<\/p>\n\n\n\nExplanation:<\/strong><\/h3>\n\n\n\n
\n\n\n\nKey Characteristics of Cash Equivalents:<\/strong><\/h3>\n\n\n\n
\n
Cash equivalents typically have an original maturity of three months or less<\/strong> from the date of acquisition. This ensures that their market value remains stable, and they can be quickly turned into cash without loss.<\/li>\n\n\n\n
Cash equivalents are investments that a company can quickly liquidate without significant loss in value. Examples include Treasury bills, commercial paper, and money market funds<\/strong>.<\/li>\n\n\n\n
Because these instruments are short-term, they are not significantly impacted by changes in interest rates or other market factors. Their value remains relatively constant.<\/li>\n\n\n\n\n
\n\n\n\nWhy the Incorrect Option Is False:<\/strong><\/h3>\n\n\n\n
\n\n\n\nConclusion:<\/strong><\/h3>\n\n\n\n