Mean versus Median Corporate Cash

Fascinating analysis by Thomas McManus of Banc of America Securities regarding the cash rich balance sheets — estimated as high as a trillion dollars — of Corporate America.

McManus observes:

"Who owns all of this cash and what are they likely to do with it? Well, the enormity of some of the figures that are widely discussed — we reckon that the S&P 1500 companies (excluding companies that are classified as financials) control $900 billion cumulatively in cash and equivalents — is whetting some investors’ appetites.

But we see today’s balances as less significant than widely believed. Most of the stash is concentrated among very few companies. Fully 25% of the $900 billion is held by only 10 companies, and 29 more control the next 25%.

Business balance sheets may appear healthier these days until one considers the funding status of defined benefit pension plans, which has become more onerous as low long-term interest rates have raised the present value of future liabilities." (emphasis added)

Quite a revealing statistic . . .


Are Corporations Truly Flush with Cash?
Barron’s MONDAY, AUGUST 22, 2005 4:04 p.m. EDT

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