WSJ Says Companies Shrink Cash
"Companies Shrink Cash Buffers as Economic Shock of Pandemic Fades" writes The Wall Street Journal. The article states, "Companies are whittling down the cash buffers they built early on during the pandemic, putting capital to work through acquisitions, buybacks and, in some cases, buying extra inventory to weather supply-chain backlogs. Investors in the weeks ahead will scrutinize corporate cash levels to see if they continue to decline, or if they level off, as companies report second-quarter earnings. While corporate balance sheets remain strong overall, high inflation is putting pressure on profit margins and driving up expenses amid fears of an economic slowdown. After issuing record amounts of debt while interest rates were low, companies have pulled back on bond sales and raised less capital as rates have increased." The piece tells us, "Median cash ratios -- a liquidity metric that compares cash and equivalents to current liabilities -- have declined steadily in recent quarters but remain above prepandemic levels, according to S&P Global Market Intelligence, a financial data provider. Highly rated U.S. companies had a median cash ratio of 21.5 during the first quarter, down from 29.1 a year earlier, but still above the fourth quarter of 2019, before the pandemic began, when their ratio was 19.5, according to S&P.... Cash ratios at companies across a range of other industries -- consumer discretionary goods, information technology and energy, among others -- continue to decline but remain above 2019 levels, according to S&P." The Journal adds, "[A]mong the largest U.S. companies, total cash balances remain higher than they were before the pandemic. Cash, equivalents and short-term investments at S&P 500 companies totaled $8.3 trillion at the end of the first quarter, up 1% from a year earlier and 42% from the fourth quarter of 2019, according to S&P." See also the WSJ's "Hoarding Cash? Don't Swing at Every Yield Pitch".
