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Friday, May 11, 2012 1:35 AM


Cash Cow Liquidity Comparison: Where's the Cash and Where's the Debt? A Look at the Top 50 Companies


In light of  renewed banter about corporations being flush with cash following Apple's stellar earnings, I thought it would be instructive to take a look at the top 50 companies by market cap in the following ways:

  1. Debt and liabilities vs. cash
  2. Debt and liabilities vs. cash plus short-term investments
  3. Debt and liabilities vs. cash plus both short-term and long-term investments 

With thanks to Ross Perez at Tableau Software for compiling the data for my idea, please consider the following interactive graph.

Note the ability to change the "cash" metric in the upper right of the graph.



Liquidity Comparison

Richard Shaw has an excellent article on Seeking Alpha that discusses cash, short-term investments, and long-term investments and what they mean: Comparing Liquidity Of Microsoft And Apple And Both Compared To Other Cash Rich Companies.

Bottom line: net cash on hand at the top 50 companies is negative to the tune of $1.479 trillion. If one considers short-term investments to be cash equivalents, then net cash is negative $1.251. Only if long-term investments are included does the number go positive.

Clearly there is not as much "sideline cash" as most are led to believe. By the way, the notion of sideline cash is bogus in the first place.

No Such Thing As Idle Sideline Cash

For those who want a second opinion, John Hussman has written about sideline cash on several occasions. Please consider There's No Such Thing as Idle Cash on the Sidelines.

The amount of "sideline cash" has been rising for years and will keep doing so unless money supply contracts. Yet the S&P 500 was clobbered in 2008 and early 2009 anyway. Why?

Stock prices rise and fall on sentiment changes every single day, not because money flows into or out of the market.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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