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Companies Continued to Add Cash in 4Q11

  • By Andrew Deichler
  • Published: 2012-01-23

Companies continued to stockpile cash in the closing months of 2011, according to the AFP Corporate Cash Indicators™ (AFP CCI).

The quarterly study, which gauges changes to U.S. corporate cash balances, found that 49 percent of organizations had greater balances at the end of fourth quarter 2011 than the previous quarter. Cash hoarding also increased year-over-year, as 43 percent of organizations reporting larger balances at the end of 2011 than the end of 2010.

The study also revealed a more bullish attitude by reporting organizations toward investment selection for cash and short-term investments. A net five percent indicated a more aggressive investment selection.

The trend of increasing balances is expected to continue, as 32 percent of reporting organizations indicated that they intend to build cash and short-term investment balances in first quarter 2012, as opposed to 27 percent that expect to reduce them. However, the difference (+5) was smaller than the October and July 2011 surveys (+13 and +17, respectively), which could be an indication that the pace is slowing.

“The decline in the year-to-year index suggests the pace of cash accumulation may be slowing, said Kevin Roth, Ph.D., managing director, Research and Strategic Analysis. “We will be watching this closely to see if this is a sign of building confidence among business leaders.”

Jim Kaitz, AFP’s president and CEO, acknowledged corporates’ ambitious-yet-guarded attitudes. “With the U.S. election approaching and uncertainty with the euro, caution reigns among corporate treasurers,” he said. “Although they are choosing slightly more aggressive short-term investment vehicles, the stance that they are adopting for early 2012 is wait-and-see.”


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