Which statement best defines cash equivalents?

The definition of cash equivalents is best captured by the description of short-term, highly liquid investments that are easily convertible to cash. Cash equivalents include investments that can be quickly and easily converted into a known amount of cash, typically within three months of their purchase date. This characteristic allows these instruments to provide liquidity for a company's operations and financial needs.

Investments classified as cash equivalents generally include treasury bills, money market funds, and commercial paper, all of which are not subject to significant risk of changes in value. This definition is crucial for financial reporting, as cash and cash equivalents are presented together on the balance sheet, providing insight into a company's short-term liquidity position.

In contrast, the other options describe either investments that do not align with the liquidity criteria of cash equivalents or clarify aspects that are inconsistent with the definition of cash equivalents. Specifically, investments with a high risk of value change do not meet the stability requirement essential for cash equivalents. Long-term investments that are not easily convertible fall outside the definition since cash equivalents are inherently short-term. Lastly, a vague description of any type of cash or cash-like instrument does not accurately reflect the specific characteristics that define cash equivalents, as it could include less liquid or riskier instruments.