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High risks if it is really in terms of cash rather than bank, loosing investment opportunity and hence profits.
Agreed with the answers to colleagues
Agree with all. In addition ... illegal issue.
Dead stock, lack of business growth, Loss due to mishaps.
No business movement.
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.
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
A company holding too much cash would be giving up the opportunity to invest more in income producing assets.
Company's Profitability will Decrease
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.
losing investment
high risk
reduce return of investment
increase interest rate
