Cash equivalents are entries on the asset side of a balance sheet that include cash, along with liquid investments that can be quickly converted into cash. For example, the money in your savings account is considered to be cash, while the funds in your money market accounts and three-month Canadian Treasury Bills are cash equivalents.Generally, cash and cash equivalents don’t change much in value. For instance, the value of a stock may fluctuate wildly, while short-term Treasury bills tend to yield very modest gains. Even though money market accounts usually have higher rates of return than most savings accounts, they also affect modest changes to the overall value of your assets. Having cash and cash equivalents on your balance sheet shows investors or lenders that your business is healthy. If your revenues take a dive, you can still stay on top of your bills and other short-term liabilities. However, too much in cash or cash equivalents can be problematic. To save money in the long run, you may want to use cash to pay down high-interest debts. Ultimately, the amount of cash or cash equivalents your business needs varies depending on your industry, your objectives, and how much debt you have. However, as a general rule, you should have enough cash or cash equivalents to cover three to six months of business expenses.