Short-term investments

Short-term investments are financial assets held by a company that are expected to be converted into cash within twelve months. They are liquid enough to be sold quickly but carry slightly more risk or have a longer maturity than the instruments that qualify as cash equivalents.

They typically include treasury bills with maturities beyond three months, government and corporate bonds due within a year, certificates of deposit, and publicly traded equity or debt securities held for near-term liquidity rather than strategic purposes.

They sit just below cash and equivalents in the current assets section of the balance sheet and are collectively treated as part of a company's broader liquidity position. Analysts often combine cash, cash equivalents, and short-term investments into a single figure when assessing how much firepower a company has available.

Under both US GAAP and IFRS the classification and measurement of short-term investments depends on how management intends to use them. Trading securities are marked to fair value with gains and losses flowing through the income statement. Available-for-sale securities are also marked to fair value but with unrealised gains and losses recorded in other comprehensive income on the balance sheet rather than in net income, creating a distinction that matters when evaluating earnings quality.

Technology companies with large cash hoards, notably Apple and Alphabet, routinely hold tens of billions in short-term investments as a way of earning a return on excess liquidity without locking capital into longer-duration instruments. This makes the line material enough to analyse separately rather than treating it as a passive balance sheet item.