What number does not lie?
Tom McGinty and Cari Tuna of The Wall Street Journal took a closer look at the balance sheets of some companies to find that many have hoarded cash. The story says:
“In the second quarter, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short-term investments, or 9.8% of their assets, according a Wall Street Journal analysis of corporate filings. That is up from $846 billion, or 7.9% of assets, a year earlier. The trend appears to have continued in the third quarter, despite an improving economy.”
Today’s Tip: Use balance sheets and cash-flow statements to determine how much cash the companies you track have.
Why does cash matter? “Most finance experts consider cash numbers to be far more difficult to massage than net income, which can be maneuvered by using perfectly legal accounting rules,” writes James Gentry, journalism professor at the University of Kansas.
For tips on how to track a company’s cash, check out this article by Gentry. He will also be teaching a free weeklong Webinar, one hour a day, from Nov. 9-13 for the Reynolds Center on how to unlock the secrets in companies’ financial statements. For more information or to register, click here.
