The amount of cash held by U.S. companies has increased from $1.6 trillion in 2000 to about $5.8 trillion in 2022, according to the Kellogg School of Management. Thirteen non-financial companies in the S&P 500, including Apple, Alphabet and Microsoft, are holding cash and investments in excess of $1 trillion, accounting for almost 40 percent of the $2.7 trillion held by all of the companies in the S&P 500, according to Investor’s Business Daily.

There are a number of reasons why companies decide to hold cash, including covering unexpected payments and preparing for M&A activity. Short-term, liquid investments, such as money market funds and Treasury Bills, are often considered to be cash reserves, whereas long-term investments, buybacks and dividends are ways for companies to reduce cash reserves and return value or cash to shareholders.

Last Updated on July 16, 2022 by Ramin Seddiq