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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

What are the two definitions of cash, and why do corporate treasurers often use the second definition?

Summary Introduction

To explain: The definitions of cash and reason behind the definition being used by corporations.

Introduction:

Cash:

It is always reported under the head of current assets in the balance sheet of a company. It is treated as current asset because any asset which can be reported in form of cash within 1 financial year is classified under the current asset and cash is already present in form of cash.

Explanation

Cash definitions are mentioned below:

First definition (general view): The cash includes amount held of currency in hand and also in bank.

Second definition (corporation view): The cash includes amount held of currency in hand and also in bank. It also includes the marketable securities which are highly solvency in nature, means those which can be easily sold and converted into cash or deposits.

Reason:

The corporations always report cash and cash equivalents to indicate their financial position...

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