What does Beauty Bungalows consider to be cash equivalents?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
ts and the reported revenues and expenses during the reporting period. Actual results could vary from those estimates.
Concentrations of credit risk
Financial instruments that potentially expose the Company to the concentration of credit risk primarily consist of cash and cash equivalents. The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The balances in the Company's cash accounts did not exceed the Federal Deposit Insurance Company's insurance limit of $250,000. The Company maintains its cash and equivalents with an accredited financial institution. As of December 31, 2023 and 2022, no balances were uninsured.
Cash and cash equivalents
Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition.
The Company maintains its cash in bank deposit accounts which could exceed federally insured limits. The Company has not experienced an instance where cash held in the account exceeded insured limits since its
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the company considers cash and cash equivalents to include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition. This definition is important for prospective franchisees as it clarifies how Beauty Bungalows manages and reports its liquid assets in its financial statements. Understanding this definition helps franchisees interpret the company's financial health and stability.
Beauty Bungalows maintains its cash in bank deposit accounts, which could exceed federally insured limits. However, the company states that it has not experienced an instance where cash held in the account exceeded insured limits since its inception and has not had losses in such accounts. This indicates that Beauty Bungalows takes measures to mitigate risks associated with holding cash in financial institutions.
For a prospective franchisee, this information provides insight into Beauty Bungalows' financial management practices. Knowing that the company considers short-term, highly liquid investments as cash equivalents and understanding how the company manages its cash balances can contribute to a better understanding of the overall financial risk and stability of the franchise system.