Final answer:
Cash equivalents are short-term investments within three months of their maturity date and are subject to minimal risk of changes in value. This type of investment is highly liquid and is included in a company's cash and cash equivalents balance for financial reporting purposes. The correct answer is option B.
Step-by-step explanation:
Cash equivalent investments refer to short-term, highly liquid financial instruments that are easily convertible into a known amount of cash and which are subject to an insignificant risk of changes in value. In accounting and finance, cash equivalents include short-term investments that are so close to their maturity that they present minimal risk of changes in value because of changes in interest rates and are typically held for the short-term liabilities of the company.
Such investments must have a short maturity period to qualify as cash equivalents. According to accounting standards, cash equivalents include short-term investments that are readily convertible to cash and which are within three months or less of their maturity date. Therefore, the correct answer to your original question is B: cash equivalents include short-term investments within three months of their due date.