As this post from June 2012 outlines, corporate cash levels have been on the rise. The recently released 2012 Liquidity Survey from the Association for Finance Professionals shows that even as their corporate coffers grow, CFOs and treasurers remain focused on the safety and security of their funds.
In fact, investment safety is the driving concern for more than three-fourths of respondents -- which helps explain why bank deposits account for just over half of short-term investment balances. That's a jump from the 42 percent reported in the 2011 survey, and is more than double the 23 percent share that bank deposits held in the 2006 AFP Liquidity Survey. It's also the highest in the seven years in which the AFP has been conducting the survey. All this, despite the measly returns bank accounts offer at the moment.
Bank deposits, money market funds and Treasury securities account for nearly three-quarters of all cash balances, the AFP survey found.
The growth in bank deposits seems to have been at the expense of companies' use of money market funds. While nearly one-third of companies' short-term investments were held in money market funds in 2006, just 19 percent were in 2012.
By far, the biggest contributor to companies' growing corporate coffers has been higher operating cash flow; this was cited by 61 percent of respondents. Just over one-fifth were able to access the debt markets to boost their cash balances.
What's more, almost half -- 46 percent -- of survey respondents expect their elevated levels of cash to remain about the same over the next 12 months, while 32 percent expect them to grow. More than three-quarters say greater cash flow is driving their balances. Just one-fifth forecast a drop in balances.
Even where corporate cash levels dropped, which happened in less than 30 percent of companies, the reasons for the declines generally were positive: just under one-third boosted capital spending, one-fourth acquired a company or launched new operations, while another one quarter retired or paid back debt. Just over 25 percent of respondents attributed the drop to a decrease in operating cash flows.
Nearly three-quarters of organizations keep their short-term investments in maturities of 30 days or less. Nearly all respondents -- 86 percent -- expect no changes to their portfolios' average maturities.
"In these uncertain times, it is clear that protecting principal is the main concern of corporate treasurers," says Jim Kaitz, AFP's president and CEO.