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What are the negative consequences of a company holding too much cash?

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Question added by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date Posted: 2014/11/24
Muhammad Sohail Anwar
by Muhammad Sohail Anwar , Finance Manager , The Food Concepts

High risks if it is really in terms of cash rather than bank, loosing investment opportunity and hence profits.

georgei assi
by georgei assi , مدير حسابات , المجموعة السورية

Agreed with the answers to colleagues

Rahmat Ullah Khan
by Rahmat Ullah Khan , Administrative Asst , Trojan Holding

Agree with all.  In addition ... illegal issue.

Praveen Choyi
by Praveen Choyi , Business Development Officer , Bahrain Financing Company

Dead stock, lack of business growth, Loss due to mishaps.

 

No business movement.

 

Haris Yaqub
by Haris Yaqub , Assistant General Manager Accounts and finance , Chenone stores ltd

this shows company has excessive underutilized cash , which can be used to invest in any other activity for more profits. in fact  this shows the opportunity to invest which we are loosing. and opportunity loss to earn higher profits.

 

Ahmed kandil
by Ahmed kandil , Cost Controller , Battour Holding Cpompany

1-  high risk for the security of cash 

2- opportunity cost of not taking decision to invest cash in short - term investments 

3- lose from change in the value of currency which company hold it 

Deleted user
by Deleted user

I do not see negative effects

Divyesh Patel
by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town

A company holding too much cash would be giving up the opportunity to invest more in income producing assets.

 

Deleted user
by Deleted user

Company's Profitability will Decrease

VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

1. Security Reasons./Insurance coverage and high premiums to be paid on insurance.

2. Lead to mismanagement.

3. Main disadvantage is for Banking and financial institutions:  Holding cash without transfer to their head office may lead to borrowing from money markets at exorbitant rates to meet the statutory obligations of Cash reserve ratio or Statutory Liquidity ratio as envisaged by the Central bank of the country.  It also slow down the credit creation of banks  which may ultimately results in less utilization of available resources and the profitability. 

mohammed elkheniny
by mohammed elkheniny , Financial Controller , DNM FOR SPINNING& WEAVING AND DYING

losing investment

high risk

reduce return of investment

increase interest rate

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