US companies may be ready to deploy cash, survey shows

A change in corporate strategy for cash reserves may be in the works, according to a new survey of US corporate treasurers. Twenty-eight per cent of treasurers anticipate reducing cash holdings in the first quarter of 2013, while 23% expect to increase cash balances, according to the Association for Financial Professionals (AFP) Corporate Cash Indicators survey.

It is just the second time in the history of the quarterly survey, which began in January 2011, that treasurers planning to reduce cash reserves outnumbered those who planned to increase cash holdings.

A common corporate strategy in the wake of the recent recession has been to build and hold cash reserves. This has helped companies build a protective buffer for continuing economic hard times and reflected corporations’ reluctance to invest in acquisitions or hiring additional employees in an uncertain climate.

This strategy was manifested in the survey results for the fourth quarter of 2012, as 37% of respondents reported a larger cash balance than at the end of the previous quarter, while 32% reported their cash balance shrank when compared with the end of the third quarter.

That plus-5 margin of larger balances over smaller balances, though, was down from plus-14 in the previous quarter and represented the lowest reading since April 2011.

“A number of finance pros have told us that they have recently tapped their excess cash to fund acquisitions,” Jim Kaitz, AFP’s chief executive, said in a news release. “More often, we hear they are accessing their cash to pay down debt, repurchase shares or issue dividends.”

On a year-over-year basis, 47% of respondents reported greater cash balances at the end of the fourth quarter of 2012 than at the end of the previous year. Just 27% had less cash at the end of 2012 than at the end of 2011.

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Ken Tysiac ( is a CGMA Magazine senior editor.