Short-term investments, also known as marketable securities, are investments that a company intends to hold for less than one year. They are highly liquid and easily convertible into cash. Short-term investments are found on the company's balance sheet, under the current assets section.
The primary purpose of short-term investments is to protect the company's money while generating a small return. They are a way for the company to put its excess cash to use, rather than let it sit idle. The company can quickly sell these investments when it needs cash.
Short-term investments are generally considered safe and low-risk. However, they do carry some risks. For example, the market value of these investments can fluctuate, potentially leading to a loss when the company sells them. Also, while they are liquid, they are not as liquid as cash. If a company needs cash immediately, it might not be able to sell its short-term investments quickly enough.
Apple invests its excess cash in short-term investments like treasury bills and commercial paper. These investments generate a return while Apple decides how to best use its cash. For example, it might use the money to develop a new product, acquire another company, or return money to shareholders via dividends or share buybacks.
Walmart also invests its excess cash in short-term investments. These investments provide a return while Walmart decides whether to open new stores, improve its existing stores, or return money to shareholders.
Exxon Mobil, like many other companies, invests its excess cash in short-term investments. The company uses the return from these investments to fund its operations and invest in new projects. If the oil price drops and the company needs cash, it can sell these investments.