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The cash that companies carry on their balance sheets is typically divided into three categories: working capital, liquidity, and strategic cash. Working capital is the cash needed to fund day-to-day operations. Liquidity is cash that an organization keeps on hand to meet an unexpected shortfall in working capital. Businesses traditionally have held their working capital funds in bank accounts and held the cash designated for liquidity in prime money market funds, which deliver low yields but offer withdrawal at any time.

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