Cash and cash equivalents are the most liquid asset

Asset

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...

s found within the asset portion of a company's balance sheet

Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...

. Cash equivalents are assets that are readily convertible into cash, such as money market

Money market

The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...

 holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper

Commercial paper

In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or...

. Cash equivalents are distinguished from other investments through their short-term existence; they mature within 3 months whereas short-term investments are 12 months or less, and long-term investments are any investments that mature in excess of 12 months. Another important condition a cash equivalent needs to satisfy is that the investment should have insignificant risk of change in value; thus, common stock

Common stock

Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...

 cannot be considered a cash equivalent, but preferred stock

Preferred stock

Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...

acquired shortly before its redemption date can be.

Payments

"Cash and cash equivalents", when used in the contexts of payments and payments transactions refer to currency, coins, money orders, paper checks, and stored value products such as gift certificates and gift cards.

If in adjustment of cash flow it is written that investment is short term you should not consider that investment as a part of cash and cash equivalent,