As cash is the most liquid of all assets and liquidity is crucial to a company, all companies should hold as much cash as possible.

Question

Quizplus · Accepted Answer

While cash is important for day-to-day operations, holding too much cash can actually harm a company's profitability. Cash sitting idle doesn't generate any returns or value for the company, and it can be more beneficial to invest excess cash in other assets or use it to pay down debt. Additionally, excessive cash hoarding may make a company a target for takeover attempts or activist investors pushing for changes. Therefore, it's important for companies to find a balance between holding enough cash for emergencies and investing excess funds to generate long-term returns.

As Cash Is the Most Liquid of All Assets and Liquidity