If nothing else, a large stockpile of excess cash tells us that a company literally generates more profit that it can spend, which isn’t exactly a bad sign. And regardless of which path the economy takes, they will be in a better position to respond.
Should the financial markets suffer some type of shock, there’s nothing more buoyant than U.S dollars. And in prosperous times, these companies will be holding all the cards.
That means large cash stockpiles are both a reassuring safety net and a springboard to opportunity.
This post originally appeared at Investing Daily.