Cash equivalents are short-term investments that are so liquid and safe they are practically the same as cash. They mature within 90 days or less and carry minimal risk of value change.
Common examples include Treasury bills, money market funds, and commercial paper. A company holding $5 million in Treasury bills maturing in 60 days can treat it almost like having $5 million in cash.
On the balance sheet, cash and cash equivalents are combined into one line item — the most liquid current asset. Investors look at this number to assess how much readily available money a company has.