what is near money 
near money sometimes referred to as quasi money or cash equivalents is a financial economics term describing non cash assets that are highly liquid and easily converted to cash understanding near moneynear money is a term that analysts use to understand and quantify the liquidity and nearness of liquidity for financial assets near money considerations are viewed in a variety of market scenarios understanding near money and the nearness of near moneys is essential in corporate financial statement analysis and money supply management near money can also be important in all types of wealth management as its analysis provides a barometer for cash liquidity cash equivalents conversion and risk near money and near moneys or near monies comprehensively have been influencing financial analysis and economic considerations for decades financial analysts view near money as an important concept for testing liquidity central banks and economists utilize the concept of near money in determining the different levels of the money supply with the nearness of near moneys serving as a factor for classifying assets as either m1 m2 or m3 1near moneys generally refer to all of an entity s near money comprehensively the nearness of near moneys will vary depending on the actual time frames to cash conversion other factors affecting near money may also include transactional fees or penalties involved with withdrawals examples of near money assets include savings accounts certificates of deposit cds foreign currencies money market accounts marketable securities and treasury bills t bills in general near money assets included in near money analysis will vary depending on the type of analysis personal wealth managementin personal wealth management near money can be an important consideration influencing an investor s risk tolerance near money generally includes assets that an investor can easily convert to cash within a few days or months investors who depend heavily on the high liquidity of near money will choose very low risk short term near money options such as high yield savings accounts money market accounts six month cds and t bills which offer low annual returns with little risk of loss investors who have higher cash stockpiles can potentially expand out the nearness of near moneys further to gain higher returns for example two year cds have a longer maturity horizon with a greater expected return and are therefore farther out on the spectrum than a six month cd beyond low risk near money choices investors also have higher risk options such as stocks these investments can be converted to cash through market trading in approximately a few days giving them very short term nearness however the volatility and risk of stock investments can mean investors have less to cash out for an immediate need corporate liquiditythe concept of near money and nearness of near moneys is an integral part of financial statement analysis for businesses it is found in the core of balance sheet liquidity analysis here the nearness of near moneys is exemplified through two essential ratios the quick ratio and the current ratio the quick ratio looks at assets with the shortest nearness usually 90 days these assets include cash equivalents marketable securities and accounts receivable dividing the combination of these quick assets by current liabilities provides the ratio of a company s most liquid assets to its current liabilities often viewed in two ways this ratio shows the value of quick assets per 1 of current liabilities or the coverage level of quick assets to current liabilities in general the higher the quick ratio the more capable a company is of covering its current liabilities with its most liquid assets the current ratio pushes slightly farther out on the nearness spectrum with assets that are less liquid than quick assets but still convertible to cash within one year the current ratio examines a company s liquidity over a one year time horizon by dividing all of a company s current assets by its current liabilities the money supplyeconomists analysis and integrations of money supply techniques expand further on the nearness of near moneys concept by breaking down near money assets into nearness tiers these tiers are classified as m1 m2 and m3 the federal reserve fed generally has three levers it can use to influence money supply these levers are open market operations the federal funds rate and bank reserve requirements adjusting one or all of these levers can affect the money supply and its different tiers thus money supply levels can be important in comprehensive central bank policy analysis 