What is included in the definition of cash and cash equivalents for Big Apple Bagels?

According to Big Apple Bagels' 2025 Franchise Disclosure Document, cash and cash equivalents are defined as cash on hand and demand deposits with banks that have original maturities of less than 90 days. The FDD also states that the balances of bank accounts may, at times, exceed federally insured credit limits. However, Big Apple Bagels states that it has not experienced any loss in such accounts and believes it is not subject to any significant credit risk related to cash as of November 30, 2024.

For a prospective franchisee, this definition is important because it clarifies what assets Big Apple Bagels considers to be highly liquid and readily available. Understanding this definition can help franchisees better interpret the company's financial statements and assess its financial health. It also highlights a potential risk, as bank balances may exceed federally insured limits, though Big Apple Bagels believes the risk is not significant.

This definition is fairly standard in financial accounting. The inclusion of demand deposits and short-term investments (maturing in less than 90 days) aligns with common practices for classifying items as cash equivalents due to their high liquidity. The statement regarding balances exceeding federally insured limits is a standard disclosure, particularly for businesses that handle significant cash flow. Prospective franchisees should consider this information when evaluating the overall financial stability of Big Apple Bagels.