Valtrend - Butler Business Valuation

Cash reserves are piling up for some

U.S. companies hold about $1.4 trillion in cash.テつ That is a lot of money.テつ Some companies are not only saving for a rainy day – but for a Class 5 Hurricane.テつ For example, Oracle and Cisco have more than one times sales as their level of cash at $56 billion and $60 billion, respectively.テつ This level of cash does not always sit well with (activist) shareholders who want some of the money returned to shareholders in the form of dividends or stock buybacks.

Of course,テつeach company has reasons for holding this much cash.テつ They may have offshore profits and are reluctant to bring it back to the U.S. for fear of taxes.テつ If that is not the reason, why are companies not investing?テつ Certainly, holding cash is an inefficient way to deploy assets most of the time and certainly during this low interest rate environment.

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