BRIEF EXERCISE 7.1

Cash and Cash Equivalents

The following footnote appeared in a recent financial statement of The Coca-Cola Company.

We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our credit risk concentrations.

1. Are the companys cash equivalents debt or equity securities? How do you know?

2. Explain what is meant by the statement that we manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our credit risk concentrations.