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The full list of cash equivalents includes the following items with maturity dates that are typically Companies may elect to classify some types of their marketable securities as cash equivalents.
This depends on the liquidity of the investment and what the company intends to do with such products.
Interest rates will tend to fluctuate with market conditions, but will be lower than banks’ rates. Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, non-resident Indians and foreign institutional investors etc can invest in CPs.
However, investment by FIIs would be within the limits set for them by Securities and Exchange Board of India from time to time.
The issuers also needs to ensure that at the time of issuance of Commercial Paper the rating so obtained is current and has not fallen due for review.
Since such instruments are not backed by collateral, only firms with high credit ratings from a recognised rating agency will be able to sell their commercial paper at a reasonable price.
Even though these assets may be easily turned into cash (typically with a three-day settlement period), they are still excluded.
These assets are listed as investments on the balance sheet.