A Closer Look at Corporate Cash Balances In The US.
Jason Voss at the CFA Institute digs into this subject.
Contrary to popular perception US corporations seem to be accumulating cash at a slower rate than profit growth.
Put another way, it appears that U.S. corporations have an excess of cash on their balance sheets if — and only if — you: (1) ignore cash balances from 2007 to 2009; and (2) compare the corporate cash balance in the second quarter of 2011 to those in 2010. Even then, any cash considered “excess” is only $24.2 billion, which is just 1.18% above the actual cash balance of $2,047.3 billion .
The weighted average interest rate for the U.S. corporate liquid assets (shown below) is estimated at 0.51% as of 30 June 2011. Compare this weighted average return to an estimated core consumer price index of 1.7% for 2011. Consequently, the net rate of return on almost $2,000 billion of economic value is –1.19%!