Cash Reserves

Definition - What does Cash Reserves mean?

Cash reserves generally refer to money that a person or entity sets aside for an emergency situation. More specifically, cash reserves usually refer to the “emergency fund” of a recently established business in order to pay for any unforeseen expenses such as a bill that is higher than anticipated.

Justipedia explains Cash Reserves

Any basic financial planning strategy suggests that a business or a person should have an emergency fund, or cash reserves, in order to take care of unexpected circumstances when they arise. The biggest advantage of having cash reserves is that when an emergency does arise, the person or entity who is dealing with the emergency can still live within the financial means to which they are accustomed. However, if a person or entity does not have cash reserves when an emergency comes up, that person will have to radically change their budget in order to pay for the emergency.

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