U.S. Treasury bills are appropriate for a corporate treasurer to utilize for temporary investment of cash because they are highly liquid, i.e., they can be sold and converted into cash quickly without a significant loss of principal.
U.S. Treasury bills, money market mutual funds and commercial paper are all appropriate for a corporate treasurer to utilize for temporary investment of cash because they are all highly liquid, i.e., they can be sold and converted into cash quickly without a significant loss of principal. However, municipal bonds are long-term bonds, and they are not as liquid as U.S. Treasury bills, money market mutual funds and commercial paper. There is a secondary market for them so they can be sold; but their sale price is subject to changes in their market value. Therefore, the holder could lose principal if forced to sell a municipal bond to raise cash for current needs. Thus, municipal bonds are not appropriate for temporary investment of cash.
Commercial paper is appropriate for a corporate treasurer to utilize for temporary investment of cash because it is highly liquid, i.e., it can be sold and converted into cash quickly without a significant loss of principal.
Money market mutual funds are appropriate for a corporate treasurer to utilize for temporary investment of cash because they are highly liquid, i.e., they can be sold and converted into cash quickly without a significant loss of principal.
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