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Cash and cash equivalents

What counts as cash on the balance sheet, how cash equivalents are defined, and how they differ from short-term investments, with Apple, IBM, Altria and Microsoft.

The short answer

Cash and cash equivalents, on the balance sheet, means currency and demand deposits plus highly liquid investments that mature in three months or less from the date they were bought. That three-month test is the usual line between a cash equivalent and a short-term or marketable security, which is reported separately. The 10-K accounting-policies note defines the line; the balance sheet shows cash and cash equivalents as its own item, often with marketable securities or short-term investments on the next lines.

The usual definition

Apple's 10-K for the year ended September 26, 2026 states that all highly liquid investments with maturities of three months or less at the date of purchase are treated as cash equivalents. IBM's 2025 10-K uses almost the same sentence, saying those investments are considered to be cash equivalents. Altria's 2025 10-K includes demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Source: Apple 10-K for fiscal 2026, filed Nov 3, 2026 · IBM 10-K for fiscal 2025, filed Feb 24, 2026 · Altria 10-K for fiscal 2025, filed Feb 25, 2026

Typical cash equivalents include Treasury bills, money-market funds and commercial paper, when they were bought with three months or less remaining to maturity. The test is applied at the purchase date: a 12-month security with two months left is not a cash equivalent if it was bought earlier, because its original maturity was longer. Restricted cash, when material, is often identified separately rather than being mixed into the ordinary cash line.

How this differs from other investments

Securities that do not meet the cash-equivalent test are reported as short-term investments or marketable securities, sometimes split between current and non-current. Microsoft's 10-K for the year ended June 30, 2026 says that, in general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Apple reports marketable securities as both current and non-current assets, next to cash and cash equivalents, on the balance sheet.

Source: Microsoft 10-K for fiscal 2026, filed Jul 29, 2026

The cash flow statement starts from the change in cash and cash equivalents (and, under current rules, restricted cash is included in that total). Buying or selling marketable securities that are not cash equivalents shows up as an investing cash flow. That is why a company can report a large cash figure in a discussion of its liquidity, made up of cash plus securities, that is bigger than the cash-and-cash-equivalents line alone. The cash flow statement and the balance sheet are the two places to reconcile those figures.

Common questions

What is a cash equivalent?

A highly liquid investment with a maturity of three months or less at the date of purchase. Apple and IBM both use that definition in their 10-Ks. Demand deposits and currency are cash itself.

Why three months?

U.S. GAAP uses that period as the usual cut-off so that only instruments very close to cash are grouped with cash. A longer original maturity keeps the instrument out of the cash-equivalents line even if little time is left.

Are money-market funds cash equivalents?

Often yes, when they meet the highly liquid, short-maturity test the company describes in its policy note. The note, not the fund's marketing name, is what matters.

How do marketable securities differ?

They are investments that are not cash equivalents. Microsoft classifies investments with original maturities greater than three months and remaining maturities of less than one year, in general, as short-term investments. Apple shows marketable securities as separate current and non-current lines.

Which figure does the cash flow statement use?

The change in cash and cash equivalents, including restricted cash when the current presentation rules apply. Purchases and sales of other investments are investing cash flows.

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.

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