Business’ cash balances increase

If clients’ cash holdings are a good indicator of sales prospects, then life insurance professionals who cater to business owners should applaud the results of a new survey that records a double-digit gain in cash balances among businesses during the year past.

Published by the Association of Financial Professionals and underwritten by RBS Citizens, the “2013 AFP Liquidity Survey” polled 885 company treasury and finance professionals to gauge their companies’ short-term investment priorities.

The report shows that 40 percent of organizations held greater cash balances during the first quarter of 2013 than in the first quarter of 2012. Less than one in four organizations reduced their cash and short-term investment balances during this period, while 39 percent had no significant change.

“[The survey] results reveal a year-over-year increase in the net number of organizations accumulating cash,” the report states. “As companies weigh their business prospects against business environment uncertainty, many build their cash balances in anticipation of improving economic conditions. They may keep cash on the sidelines, awaiting the right growth opportunity, creating variability in measurement of cash holdings.”

The survey lists the following changes in cash and short-term investment balances during the past year for U.S. and non-U.S. cash holdings:

Percentage distribution of organizations with cash and short-term investment holdings.

The report attributes, in part, the increase in cash balances among respondents since 2012 to a rise in operating cash flow (cited by 54 percent or respondents); an increase in debt outstanding or access to debt markets (17 percent); and to an acquisition of a company or the launch of new operations (16 percent).