Companies are Repositioned for Profit Despite Sluggish Prognosis

Corporate cash trends over the last year point to purposeful repositioning for profitable operations, according to Treasury Strategies, a treasury consulting firm. The Federal Reserve today reported corporate cash balances continued to grow last quarter to US$2.1 trillion – a US$716bn increase since 1Q09. The noticeably steep growth of corporate cash levels over the last few years prompted Treasury Strategies to take an in-depth look into what corporations are doing with this record amount of cash.

“In our quarterly conversations with hundreds of corporate treasurers, we hear about the key factors behind changes in cash levels. There are several definite trends,” said Anthony Carfang, a partner of Treasury Strategies.

Three trends Carfang noted:

1. Over the last year, the number of companies that reported using their cash for capital expenditures is solidly up.
2. In the same period, significantly more companies say they are using cash for acquisitions.
3. There are dramatically fewer reports of cash declining due to negative operating cash flow.

“The trends involving capital expenditures and acquisitions clearly demonstrate corporations are investing in growth. The decline in negative cash flow from operations shows many firms that were previously bleeding cash have repositioned themselves for profitable operations,” said Cathy Gregg, a partner of Treasury Strategies.

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