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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Why do companies invest their cash in short-term investments?

To determine

Introduction: Short term investments refer to the investments that have a maturity period of less than a year.

To explain: Reason for investing in short term investments.

Explanation

Short term investments refer to the investments that have a maturity period of less than a year.

Some of the major reasons for investing in short term investments are:

  1. Nature of investment: Short term investments are highly liquid in nature and can be converted to cash easily. So, companies prefer to invest their cash (liquid asset) in short term investment (highly liquid asset, easily convertible to cash)...

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