The correct answer is: C. cash equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to cash and are essentially risk-free. Examples of cash equivalents include money market funds, treasury bills, and commercial paper.
Inventories are assets that a company holds for sale in the ordinary course of business. Examples of inventories include finished goods, work in progress, and raw materials.
Short-term investments are investments that a company expects to convert into cash within one year. Examples of short-term investments include marketable securities, such as stocks and bonds.
Long-term investments are investments that a company expects to hold for more than one year. Examples of long-term investments include land, buildings, and equipment.
Here is a table that summarizes the key differences between cash equivalents, short-term investments, and long-term investments:
| Characteristic | Cash equivalents | Short-term investments | Long-term investments |
| — | — | — | — |
| Maturity | Less than one year | One year or less | More than one year |
| Liquidity | Highly liquid | Liquid | Less liquid |
| Risk | Essentially risk-free | Some risk | More risk |
| Accounting treatment | Reported as cash on the balance sheet | Reported as investments on the balance sheet | Reported as investments on the balance sheet |