Why cash isn’t always king

Why cash isn’t always king

I like cash and I like companies that have cash. But what if they have too much? In other words: a lazy balance sheet. Now first, let me explain why too much cash is lazy.

Return on equity (RoE) is a popular metric for measuring a company’s, as well as its executives’, performance.

More cash means more assets, and therefore increases the equity part of the equation. With higher equity, the return will decrease if all else remains the same.

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2018-05-26T16:53:26+02:00 May 26th, 2018|Finance|