Short-term financial investments

Short-term financial investments are represented by investments of business entities in different financial instruments for a 12-month period. The main forms of such investments are the purchase of short-term bills of exchange, bonds, savings certificates, as well as deposits with a validity period of less than a year.

Short-term financial investments - the way an enterprise uses its free monetary assets with additional benefits in the future or at least their simple protection against inflationary losses. Due to high liquidity, short-term investments can be equated to payment means and, thus, provide priority financial obligations of the economic entity. Also, in financial management, they can be considered as monetary assets, so they use the same levers of management.

Short-term financial investments should also be considered by the entity in whose activities these funds are received. A year is too short a time to get a significant profit. That is why the funds purchased are mainly used to purchase materials and raw materials (highly liquid items of any balance). However, there are also positive aspects in this type of investment. First of all, the least risk of losing funds, as the economic situation throughout the year can be most accurately calculated and anticipated.

However, in today's complex world, except for economic factors that have a significant impact on the economic activities of the subjects, it is necessary to assess the political situation (for example, elections). Also important is the exchange rate of the national currency.

Some lenders prefer to provide funds at sufficiently high interest rates, which allow to minimize the risks and losses associated with the lack of repayment of loans.

Short-term financial investments in financial instruments such as securities are considered to be profitable only if the acquired shares are quoted in the financial market and they can be easily converted into cash at any time.

In the implementation of short-term investments, enterprises and individuals are often seeking help from specialists who calculate their income, comparing it with the risk that may arise in several months of investing free funds. Sometimes even special software is used in the analysis.

In accounting, this type of investment is indicated in the same account 58, which keeps records in the context of the list of assets. This may include shares that have been purchased for profit in the future, but with a validity of up to one year. This list also specifies such types of securities as debt, state and local authorities that have a maturity within twelve months or that assume income for one year. This account takes into account loans issued to other organizations with a maturity of up to 12 months, and bank deposits.

In addition to account 58, this type of investment can be accounted for in the sub-account 82, which, according to its name "Provisions for doubtful debts", generates profit for the purchase of short-term securities in the near future. Their accounting value is defined similarly to long-term and represents the actual costs of the investor.

Short-term financial investments in the balance sheet are displayed in lines 250-253. Line 250 is "accumulative" and consists of the sum of lines 251-253, which decrypt it by sub-accounts, namely:

- line 251 reflects the amount of borrowed funds that are issued to other business entities for less than a year;

- 252 represents the amount of own shares that were purchased from shareholders;

- line 253 shows other short-term investments (bonds, securities and deposits).