The mountain of cash corporate America is siting on keeps getting bigger.
“Standard and Poor’s Ratings Services’ rated universe of nearly 2,000 US nonfinancial companies held $US1.82 trillion in cash and short- and long-term investments as of year-end 2014, an almost 5% increase from 2013,” S&P’s Andrew Chang said.
These cash and investments comprised over 10% of the companies’ total assets.
Also, the richest of these companies are getting even richer compared to the rest. Again from the report.
“Cash is more concentrated than ever, with the top 1% (largest 25 cash holders) now controlling 48% of the cash power due mostly to rising overseas cash balances,” Chang added.
The companies leading the way in S&P’s report was Apple with $US178 billion, Microsoft with $US101 billion, Google with $US64 billion and Pfizer with $US54 billion.
Outstripping even the cash growth, however, was the growth of outstanding debts.
“The $US1.8 trillion in cash is dwarfed by the $US5.8 trillion in total debt outstanding, which increased 6x to that of cash during 2014 as borrowers of all stripes took advantage of the low borrowing cost and investors’ thirst for yield,” Chang said.
“We believe debtholders should be aware that rising debt has accompanied the high cash balances. The cash growth looks strong overall, but without the top 1%, total cash balances would have declined in 2014. And should the credit markets tighten and interest rates rise, liquidity risk will become more pronounced for the remaining 99%.”