What are some examples of highly liquid investments that Beauty Bungalows considers as 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 highly liquid investments with maturities of three months or less to be cash equivalents. This definition is important for prospective franchisees because it affects how Beauty Bungalows reports its financial health. Cash equivalents are easily convertible to cash, so their inclusion provides a more accurate picture of Beauty Bungalows' short-term financial position.
For a potential Beauty Bungalows franchisee, understanding this definition is crucial for assessing the company's financial statements. When reviewing Beauty Bungalows' balance sheets, a franchisee should recognize that the "cash and cash equivalents" line item includes not just cash on hand and in bank accounts, but also these short-term investments. This combined figure represents the company's immediately available funds.
Beauty Bungalows maintains its cash in bank deposit accounts, which could exceed federally insured limits. However, the company 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 management is aware of and actively manages its cash positions to mitigate risk. Prospective franchisees should consider this when evaluating the company's financial stability and risk management practices.