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Corporation with Lots of Cash
Finance & Accounting
Pages 3 (753 words)
Corporations with Lots of Cash It is quite unusual for an economy such as the United States who is still struggling to recover from an economic slump yet it has as much as $ 2 trillion in cash sitting in the private sector. If we are going to use Obama’s Stimulus Package as a benchmark which has saved and created over a million jobs with a mere $787 million, that $2 trillion dollars could have created over 3 million jobs.
The doubt about the economic recovery is even more compounded with the recent development of Standard and Poors’ credit downgrade of United States from triple A credit rating to just double A. With how things are going, it is still not likely that the non-financial sector will be freeing that cash for reinvestment. To better understand why these companies are conservative with their spending, we have to consider the lessons they learned from the past financial crisis. Beginning with the dot com bust in 2000, companies with more cash were able to weather the crisis better than cash strapped companies hence is this conservative attitude. The same conservative attitude also helped them withstood the crisis when the recession broke in late 2007 and the eruption of financial crisis in 2008. Companies that were more liquid were able to get through the storm as they do not have to resort to lending which were not available then. ...
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