1. What are cash equivalents? Provide two exs. Why are these items often combined with cash for the purpose of a balance sheet presentation?
2. Why are cash balances in excess of those needed to finance business operations viewed as relatively nonproductive assets? Suggest several ways in which these excess cash balances may be utilized effectively.
3. Why are investments in marketable securities shown separately from cash equivalents in the balance sheet?
4. What does the account Unrealized Holding Gain (or Loss) represent? How is this account presented in the financial statements for short-term investments classified as available-for-sale securities?
5. What is the formula for computing interest on a note receivable, and what does each term mean?