The following footnote appeared in a recent financial statement of Westinghouse Electric :The Corporation considers all investment securities with a maturity of three months or lesswhen acquired to be cash equivalents. All cash and temporary investments are placed with high-credit-quality financial institutions, and the amount of credit exposure to any one fi-nancial institution is limited. At December 31, cash and cash equivalents include restricted funds of $42 million.a. Are the company’s cash equivalents debt or equity securities? How do you know? b. Explain what is meant by the statement that “the credit exposure to any one financial institu-tion is limited.” c. Explain what is meant by the term restricted funds used in the footnote.
The following footnote appeared in a recent financial statement of Westinghouse Electric :
The Corporation considers all investment securities with a maturity of three months or less
when acquired to be cash equivalents. All cash and temporary investments are placed with
high-credit-quality financial institutions, and the amount of credit exposure to any one fi-
nancial institution is limited. At December 31, cash and cash equivalents include restricted
funds of $42 million.
a. Are the company’s cash equivalents debt or equity securities? How do you know?
b. Explain what is meant by the statement that “the credit exposure to any one financial institu-
tion is limited.”
c. Explain what is meant by the term restricted funds used in the footnote.
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