The commonly recommended eight-month emergency fund that individuals are advised to have is a type of cash reserves. Individuals hold their cash reserves in bank accounts or in short-term, stable investments that are not likely to lose value so that they can withdraw these funds or sell these investments at any time without losing money, regardless of how well the stock market is performing.
An individual's cash reserves might consist of money in a checking account, savings account, money-market fund or money-market account, and short-term Treasury Bills and CDs. Individuals and businesses that lack sufficient cash reserves can resort to credit, or in extreme cases may be forced into bankruptcy.
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He said that because the association did not keep sufficient cash reserves, it could not pay its bills on time.