Why should companies be careful to define cash and cash equivalents correctly?

Question

Business

Nelson Faulkner

12 September, 00:57

Why should companies be careful to define cash and cash equivalents correctly?

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Answers (1)

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Raegan Fritz · Answer 1

If a company overstates cash and cash equivalents, they will appear more liquid than they really are. which would mislead investors and they may feel risky for investing on that company shares. On other side, it will be more difficult to calculate the exact value or net worth of the company.