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're liquid enough to be sold quickly but carry slightly more risk or a longer maturity than 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 analysts often combine cash, cash equivalents, and short term investments into a single figure when assessing how much firepower a company has available.

Under US GAAP, debt securities are classified by how management intends to use them. Trading securities are marked to fair value with gains and losses flowing through the income statement, while available-for-sale securities are also marked to fair value but with unrealised gains and losses recorded in other comprehensive income rather than net income, a distinction that matters when evaluating earnings quality. Equity securities run their fair value changes through net income. IFRS draws a similar line between assets measured at fair value through profit or loss and those measured at fair value through other comprehensive income.

Large technology companies with substantial cash hoards 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, making the line material enough to analyse separately rather than treating it as a passive balance sheet item.