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A License to Hold Excess Cash

Keeping idle cash on the balance sheet is viewed more positively than before, thanks to the financial crisis.

February 17, 2010

The piling up of large amounts of cash and cash equivalents on corporate balance sheets may be negative for the U.S. economy as a whole, but CFOs have definitely embraced the idea.

According to the Duke University/CFO Business Outlook survey for the fourth quarter of 2009, companies on average were holding more cash and marketable securities than they did a year ago — 19.3% of book assets, compared with 17.9% in 2008. The largest increases occurred at AAA-rated companies, which held cash and securities equivalent to 23.2% of book assets, up from 21.9% the previous year. Firms in the A- and B-rated tiers held 16%, up from 12.6% a year earlier. Read more...

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