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Money Never Sleeps: Cash Build-up on Corporate Balance Sheets

While critics have raised alarms about the rising cash holdings on corporate balance sheets, there are broader, long-term reasons for the move to cash that go far beyond a knee-jerk reaction by business to current economic uncertainty, according to a new report from the C.D. Howe Institute.

In “Not Dead Yet: The Changing Role of Cash on Corporate Balance Sheets,” Finn Poschmann finds corporate cash holdings have increased in waves over the past quarter-century in response to changing economic conditions and business process improvements.

“The critics’ outcry over corporate cash hoards, which has gone so far as to accuse business of malfeasance, is mistaken,” commented Poschmann. “A closer look suggests more to the story.”

Poschmann finds that while corporate cash as a share of assets has risen in the past decade, the share of other, non-income-earning current asset components, such as inventories and accounts receivable, has significantly fallen. “Businesses appear to have been responding to long-term trends in economic conditions, including enhanced business processes that have shrunk inventories, by better managing their balance sheets,” said Poschmann. “Businesses have been shoring up financial assets to match liabilities, in part for precautionary reasons; there is no economic problem or market failure to be addressed and, accordingly, no policy action indicated in response,” noted the author.

Poschmann provides in-depth evidence for his argument in data going back to the 1950s, which show that businesses, overall, are keeping less inventory on hand for reasons that range from the global shipping container revolution to better management information systems and just-in-time delivery methods. These changing business conditions, along with a precautionary approach to economic headwinds, tell the real story, said Poschmann. “Assets held in cash-like forms, which earn interest, and provide cushions against unexpected events, can fund future investments and are a lot less dormant than holdings in inventories and accounts receivable, which typically have zero returns.”

Jab We Met: 'A lot can happen over coffee'

Here, Swati Roplekar tells us how she first met her partner and they eventually fell in love.

I joined this company where MD (that's what I and his close friends call him) was working as a Team Leader.

On the day I joined the organisation he was on leave as he was unwell. But I had heard about him through other people in my team.

We met for the first time when he returned to work. Our first meeting was not so impressive. I started disliking him as I felt he was being too bossy (he being the TL). 

We were a group of four friends in the same company and MD later joined our group through a common friend. I didn't even like him joining our group.

After work, the entire group would spend some time at a nearby restaurant and have fun. Slowly, as I started talking to him things got better. Thereafter MD and I started chatting over the internet for at least two to three hours every day.

That's when I got to know him better and soon we became the best of friends. This continued for a long period of time. We enjoyed each other's company and we knew almost everything about each other.

We liked each other because both of us were simple at heart and cared for each other a lot.

He also liked the fact that I did not indulge in gossips.

Meanwhile our common friend's marriage got fixed and all of us went to Delhi to attend her marriage.

MD tried to propose his love to me on airplane about 10,000 metres above ground but did not have the courage to say those three words. After returning from the trip, MD proposed to me over the phone. Although I liked him, I rejected his proposal.

I knew that my family would never approve our relationship because we belonged to different states and castes.

However, despite the rejection, MD regularly invited me for a coffee in order to spend some time together. Every time we met at Cafe Coffee Day, he'd always tell me "A lot can happen over coffee".

After six months I accepted his proposal because somewhere deep down I loved him too and couldn't stay away from him (and yeah, MD's coffee magic worked too... :)).

After a few months, we shared our feelings to our respective families. His family approved our relationship while my parents, as expected, didn't approve.

They were against the relation because they felt inter caste marriage would not be successful. They said there was no cultural compatibility between us -- because I'm a maharashtrian and he, a north Indian. 

At this juncture, our friends who'd supported us through advised us to take a strong decision. So we decided to continue our relationship and somehow managed to convince my parents.

Gradually the matter was brought up at my home and after a year, I told them that my decision is final. I would marry only him and nobody else. 

My family met MD and his parents and now they have approved our relationship and soon we are going to tie the knot. We are happy as we have successfully convinced my family and are now going to spend the rest of our lives together.

Today, I would like to thank MD for being so patient and supportive and also to all our friends who supporting us through our tough times.

Yeh ishq nahi aasan
Bas itna samaj lijiye
Ek aag ka dariya hai
Aur dubke jana hai..!!

All's well that ends well...!!