The term 'Cash and Short Term Investments' refers to the liquid assets held by a company. These include actual cash, cash equivalents, and short-term investments that can be quickly converted into cash, usually within a year. It is an essential part of a company's balance sheet and indicates its immediate liquidity.
While the definition above gives a brief understanding, let's dive deeper into the concept. 'Cash' includes physical cash and cash in bank accounts. 'Cash equivalents' are investments that can be readily converted into cash with negligible risk of change in value, like treasury bills and money market funds. 'Short-term investments', also known as marketable securities, are financial instruments that can be sold within a year, like stocks, bonds, and certificates of deposits.
The sum of cash, cash equivalents, and short-term investments gives an insight into a company's liquidity, i.e., its ability to meet short-term obligations without needing to sell long-term assets or take on debt. This is crucial for both the company's ongoing operations and its financial stability.
However, a large amount of cash and short-term investments isn't always a good thing. If these assets aren't being invested back into the company or used to generate returns, it could indicate poor financial management.
For Amazon, 'Cash and Short Term Investments' include the cash it has in bank accounts, cash equivalents like money market funds, and short-term investments like treasury bills. This money can be used to meet immediate expenses or invested in short-term opportunities.
Apple's 'Cash and Short Term Investments' include cash, money market funds, and short-term securities like government bonds. This liquidity enables Apple to invest in research and development, acquire other businesses, and return capital to shareholders.
For Tesla, 'Cash and Short Term Investments' include cash, cash equivalents like treasury bills, and short-term investments like corporate bonds and stocks. This provides the liquidity necessary for Tesla's operations and potential investments.