What are cash assets? (with photos)

Cash assets are any economic resources that can be readily converted into cash.

Cash assets are any economic resources that can be readily converted into cash. These assets often retain high levels of liquidity and can be used to secure a company’s or individual’s financial ability to conduct day-to-day operations. Cash assets are normally classified as current assets for accounting purposes, but differ slightly in definition. Typically, current assets are expected to be converted into cash within an operating cycle, which is typically one year. Cash assets, however, are unique to current assets as they generally must be convertible into cash within three months or less.

Cash assets can include treasury bills, money market funds, commercial paper and other assets that can be easily converted into cash.

These assets can include treasury bills, money market funds, commercial paper, and other assets that can easily be converted into cash. Any other financial investment or deposit maturing in three months or less also qualifies as an asset. Assets that can be financially accounted for, but are not considered liquid assets, include property, plant and equipment and other investments with maturities exceeding three months. Intangible assets such as patents, trademarks and copyrights are also not considered liquid assets.

Companies account for cash assets in an effort to help creditors, investors and other entities make decisions regarding the company. For example, a company that has applied for equity funds from a lender to market a new product will be more likely to receive funding if the company’s balance sheet reflects a higher liquid assets ratio than other applicants. The higher liquid asset ratio generally reflects a greater likelihood that the company will be able to repay debt. Accounting for a company’s net assets can also allow management to determine the effects of day-to-day decisions on the company’s cash flow as assets are reported on the company’s balance sheet.

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Cash assets can be calculated for an individual for the same reasons as a company, although they are usually calculated on a smaller scale. Accounting for an individual’s assets can be done to determine the likelihood that he will repay a loan he may apply for. Assets can also be counted for personal reasons, such as an annual review of someone’s financial portfolio. In some cases, the need to report these assets is for tax or debt purposes.

An individual’s liquid assets may include their checking and savings accounts, stock bonds and short-term deposits. The criterion for determining a cash asset is normally the same as for companies: the asset must be easily converted into cash within three months. Regional laws and methods of calculating these assets may vary. Most of the time, this form of financial auditing is done by a professional, who generally understands local laws and accepted methods.

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