Chemical Companies Increase Cash Assets

Abstract

Chemical companies seemed to take a more fiscally conservative approach to conducting business in this year's second quarter than in the first as the U.S. chemical economy continued in the doldrums. A C&EN survey of 13 large chemical companies indicates that, although earnings dropped, these firms apparently took a prerecessionary step toward cash management, reining in inventories, receivables, accounts payable, and short-term debt, and thus cutting day-to-day financing needs and increasing cash hoards. Although inventories and receivables are listed as current assets on corporate balance sheets, they require financing, thereby draining away cash and sometimes increasing short-term debt. During the second quarter, according to the survey, the 13 companies increased their cash and marketable securities an average of 22% to a combined total of $7.28 billion. During that period, they managed to keep current liabilities at the same levels as in the first quarter. Thus the firms' liquidity—cash and cash cov...