Which statement about short-term investments is true?

Which statement about short-term investments is true?

• A. They are investments that will expire within one year.
• B. They are investments meant to be held for decades.
• C. They are always in real estate.
• D. They cannot be liquidated quickly.

Answer: (A)

Short-term investments are assets that are kept with the goal of quick access to cash, typically maturing within one year or less. This emphasis on liquidity and a short time horizon is what defines them. That's why the statement that they expire within one year is the true description—they’re designed to be converted to cash (or reach maturity) quickly. By contrast, investments intended to be held for decades are long-term, not short-term. Real estate can be part of many investment strategies but is not a defining feature of short-term investments, and short-term investments are valued for their ability to be liquid, not for any specific asset class. Saying they cannot be liquidated quickly would contradict the fundamental purpose of short-term investments, which is to provide fast access to funds.

Short-term investments are assets that are kept with the goal of quick access to cash, typically maturing within one year or less. This emphasis on liquidity and a short time horizon is what defines them. That's why the statement that they expire within one year is the true description—they’re designed to be converted to cash (or reach maturity) quickly.

By contrast, investments intended to be held for decades are long-term, not short-term. Real estate can be part of many investment strategies but is not a defining feature of short-term investments, and short-term investments are valued for their ability to be liquid, not for any specific asset class. Saying they cannot be liquidated quickly would contradict the fundamental purpose of short-term investments, which is to provide fast access to funds.