A cash instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

In finance, a cash instrument refers to any financial asset that can be easily converted to cash or is already in cash form. This includes various forms of instruments like stocks, bonds, and derivatives, which represent a claim on the company's assets after liabilities have been settled.

When we talk about cash instruments in the context of liabilities, it implies that the instrument carries a residual interest, meaning its value is contingent upon the entity's assets remaining after all obligations have been met. This makes cash instruments critical in determining the liquidity and risk profile of an entity since they represent what belongs to shareholders and investors once all debts are paid.

In summary, a cash instrument is fundamental for understanding the financial health of an entity, serving as a direct link between the asset pool and the obligation to creditors, thus influencing investment decisions and valuations in financial markets.