Let me first explain what cash and cash equivalents mean. Cash and cash equivalents are an asset that appears on a company's balance sheet and includes currency (coins and banknotes) held by a company (in cash and bank accounts) and cash equivalents. Cash is a medium of exchange, a store of value, and a unit of account, and a business must have sufficient liquidity to pay its liabilities. A higher liquidity ratio (ratio of cash and cash equivalents to current liabilities) suggests that the company is liquid (i.e. not expected to have any difficulty paying its liabilities in the very short term). A business generates cash from the sale of products and services, sales of assets, loans from banks and other creditors, and from capital contributions by its owners. It uses cash to pay operating and capital expenses, liabilities, and to pay dividends to its owners. Information on the sources and uses of cash is presented in the cash flow statement. Businesses keep a small amount of cash (called petty cash) for day t...