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Part One

We’ve heard it before, and the story keeps popping up. U.S. companies are sitting on two trillion dollars of cash according to some estimates. Sure sounds like a lot but if you’re like me, once you get past a billion dollars you lose count.

So let’s put it in perspective. The table below gleaned from World Bank data lists countries whose GDP exceeded a measly one trillion dollars – half of what’s sitting in U.S. companies’ bank accounts. Our first year economics classes remind us that Gross Domestic Product is the sum of all the goods and services produced in a year by a single country.


1-23 TNE blog table_GDP

Now we get a better picture of a couple of trillion bucks. It’s greater than entire economic output of Russia in one year. And India. And Canada. And Spain. And… well, you can read a table as well as I can.

Boggled yet? If not, here’s another factoid. Apple’s $120 billion total cash and cash equivalents, if left to grow at its current 20% growth rate for a mere three years, would see Apple sitting on a cashpile of $1 trillion. This is obviously a staggering amount for a single company, all the more so as it would get within spitting distance of the value of the entire economic output of Korea, Mexico or even Australia (even with generous growth assumptions in place for those economies).

One can go on. So it’s a lot of money. But why is it being held instead of spent on new investments or returned to shareholder in the form of dividends – or even better yet, paid to suppliers to get high-return early payment discounts?

The conventional wisdom has been companies have been hoarding cash as a way of mitigating against the uncertainty of demand, and in continuing skepticism about the strength of the global financial system. Moody’s analyst Richard Lane as quoted in Bloomberg summarized the thinking:

“Treasurers have distinct memories of capital markets closing very quickly, and I think companies in general are more focused on controlling their fate from a funding standpoint and part of that means being able to internally fund your investment needs.”

Separately, some have pointed to the incredible tax bill that would arise if cash was ‘repatriated’ to the U.S. – even though that doesn’t explain why dollars can’t be invested in local jurisdictions.

Is there another method to the madness? Check back next week as I share some perspectives on how and why some are elevating cash from ‘mere king’ to Jedi Knight.


About the author
Peter Lugli
Peter Lugli

Peter is responsible for Ariba’s strategy and direction of the working capital solutions and services. He joined Ariba via Quadrem, where he was the vice president of marketing and alliances.

Prior to his private sector experience, Peter ... Read More >>>


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