Abstract
We all know that companies have been stockpiling cash. But how much is enough? What is optimal? The author of this article reminds us that while the cash on U.S. companies' balance sheets may have risen in recent years as a precautionary reaction to the global financial crisis, the rise in cash holdings at U.S. companies is not just a recent phenomenon. And when addressing significant cash balances in management discussion and analysis (MD&A), companies must consider limitations on cash accessibility and changes or trends in liquidity that may be particularly relevant as the economy improves. Regarding the size of cash balances, recent studies in finance and accounting have developed models to predict optimal cash levels, which may be useful in assessing the levels of cash on company balance sheets.
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