Reviewed by Aug 27, 2020| Updated on
What is Near Money?
Near money is a term in financial economics, describing highly liquid non-cash assets that are easily convertible into cash. Also, near-money can be called quasi-money or cash equivalents. The proximity of near-money is important to determine the degree of liquidity.
Savings accounts, deposit certificates (CDs), foreign currencies, money market accounts, marketable securities, and Treasury bills are examples of near-money assets. Generally speaking, near-money assets included in the near-money analysis can differ according to the type of analysis.
Understanding Near Money
Near money is a concept used by investors to explain and measure the liquidity and liquidity closeness for financial assets. In a variety of market scenarios, near-money considerations are looked at.
In the review of corporate financial statements and the management of money supply, knowing near money and the closeness of near-moneys is important. In all forms of wealth management, near money can also be relevant because its analysis provides a barometer for cash liquidity, cash equivalent conversion, and risk.
Near money usually refer comprehensively to all near-money of an entity. The proximity of near-money to cash conversion can vary depending on the actual time period. Many factors that affect near-money might also include transactional fees or withdrawal penalties.
What is the Difference Between Money and Near Money?
It can be important to make the distinction between money and near money in all near-money evaluations. Money involves cash in hand or cash in the bank, which can be accessed as a transactional exchange medium on demand for use. Near money needs some time to convert to cash. In order to meet immediate obligations, individuals and businesses must have cash available.
Near money is not actually money but are assets that can easily be converted into cash. Depending on the type of study, the scope of close money assets can differ. The proximity of near monies will also be an important factor when making all kinds of financial decisions.