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Short-term investments consists of surplus cash which instead of being left idle at the bank is invested in deposit accounts, government securities, local loans, other companies' ordinary shares, etc. Such investments must be realisable at short notice. It would seem at first sight that these investments, yielding as they do a relatively low rate of interest, e.g., 24% to 5%, might be more profitably employed in the business of the company itself to realise a much higher profit, e.g., 15%. It is, however, a satisfactory position if sufficient of these liquid assets have been set aside to enable capital projects, acquisition of subsidiaries or other contingencies to be met without difficulty as they arise. This is always provided that too much emphasis has not been put on the accumulation of surplus liquid assets to the detriment or normal expansion within the business.

Thus short-term investments indicate the presence of temporarily surplus liquid assets. The investments are usually recorded at cost or written-down value (cost minus depreciation). If these investments are quoted on the Stock Exchange, they are described as 'quoted investments'. The total current market value of these quoted investments is stated in the balance sheet

Tax reserve certificates are a form of short-term invest-ment carrying interest (at the time of writing 21% per annum tax free). They constitute money lent to the Government which can either be cashed or surrendered in payment of tax. These certificates are purchased from the Inland Revenue in units of L5, and the interest they bear is credited to the company when surrendered in part payment of tax due.


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