Date of Defense

Spring 4-19-2012

Date of Graduation

Spring 4-28-2012

Department

Accountancy

First Advisor

Robert Balik, Finance and Commercial Law

Second Advisor

Jerry Kreuze, Accountancy

Third Advisor

Sheldon Langsam, Accountancy

Keywords

savings, cash

Abstract

Today, many United States firms are holding nearly double the amount of cash they held in the 1980s. The purpose of this discussion is to interpret and analyze the increase of cash-holdings of United States firms throughout the last 30 years, and to determine exactly how and why firms are holding so much more cash than they used to hold in the past. This discussion conveys significant reasons of why firms throughout the United States are holding more cash, including: a recent drop in on-hand inventories, an increased risk of cash flows for firms, money spent on capital by firms has fallen and the movement of investment cash outside of the United States, as well as many other important reasons.

All of the above factors contribute to a dramatic and poignant piece of information: they increase the average cash-to-total assets ratio for sampled U.S. firms. However, only nonfinancial firms are considered because financial firms may carry cash to meet capital requirements rather than for the economic reasons. U.S. nonfinancial firms are holding more cash than they have ever held in their reserves before and corporations are hoarding cash at a rate that has never been documented. In fact, the typical American corporation has increased its savings so sharply that it probably has enough cash on hand to completely pay off all of its debts! (if any exist) So, why are they choosing not to pay off debt if they have the ability to pay off their debts?

Comments

Citation and abstract only available

Access Setting

Honors Thesis-Open Access

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