SOURCE: Treasury Strategies

Treasury Strategies

December 09, 2010 15:12 ET

Corporate Cash Increases as Economic Uncertainty Continues According to Treasury Strategies

CHICAGO, IL--(Marketwire - December 9, 2010) - The Federal Reserve today reported corporate cash balances spiked to $1.93 trillion -- a 35% increase since the first quarter of 2009 -- representing $530 billion. This significant increase indicates companies are still accumulating cash rather than redeploying it, according to Treasury Strategies, a treasury consulting firm.

"From our work with clients, as well as survey data collected this week, we see that corporations have experienced very strong growth in cash flow from operations. Given that total corporate cash continues to grow, these findings together tell us that corporations are still not comfortable with redeploying their cash due to the uncertain economic outlook," says Cathy Gregg, Partner of Treasury Strategies.

Beginning in the first quarter of 2009, companies began to accumulate substantial amounts of cash, which triggered accusations or hoarding. "Today's report demonstrates that corporations are making purposeful decisions to not deploy cash as a precautionary measure to mitigate economic risk," says Anthony Carfang, Partner of Treasury Strategies.

Over the next six months, Treasury Strategies' clients may begin to deploy some of that cash through activities such as stock buybacks, mergers and acquisitions, and capital expenditures, according to survey results.

Interestingly, these same clients indicate they are unsure how the tentative tax deal will impact their activities. Although 15% indicate they are more likely to increase capital expenditures and 10% are more likely to pay down short-term borrowing, nearly two-thirds indicate the tax deal will have no impact on their cash management activities.

"In the end, it looks like corporations have done a tremendous job of responsibly managing their operations by holding onto cash through challenging economic events. Now as the future outlook improves, we're seeing a continuation of that responsible behavior through purposeful spending aimed at strengthening stakeholder relations and business infrastructures," says Gregg.

Corporations wishing to participate in the survey can click this link https://www.surveymonkey.com/s/99W2PLD.

About Treasury Strategies, Inc.
Treasury Strategies, Inc. is the leading Treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions. For more information, please visit www.TreasuryStrategies.com.

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