What is meant by cash reserve?

A cash reserve refers to the amount of money that a business keeps readily available to ensure it can meet its short-term obligations and handle unforeseen expenses. This liquidity is crucial for a company, as it allows for flexibility and stability in operations, particularly in times of financial stress or unexpected costs. By maintaining a cash reserve, a business can quickly react to opportunities or challenges without the need for immediate loans or additional funding. This is essential for safeguarding the continuity of the business and ensuring it can function smoothly during unexpected situations.

The other choices describe different financial concepts but do not align with the specific definition of a cash reserve. Investments in stocks and bonds, for instance, refer to long-term assets that may not provide immediate cash availability. The initial funding for starting a business pertains to capital requirements before operations begin, while funds allocated for advertising focus on marketing expenses rather than liquidity.