Cash is King– Power of Cash: Guiding Business for Generations– Still True in Technology-Driven Global Economy…

Cash is king– a business with cash can survive and still have a chance to grow… a business without cash has no chance, it sputters then just dies; it’s as simple as that… ‘Cash is king’ is an expression often used in analyzing the overall fiscal health of a business…

According to Alex Spanos; a business could have a large amount of accounts receivables and other non-cash assets on its balance sheet which would increase its equity, but the business could still be short on cash with which to pay its bills,such as; payroll, rent, utilities, insurance… and unless it was able to convert some of its current assets cash (or take on debt) quickly, it could fail and be technically bankrupt despite a positive net worth…

According to Jack Welch; corporation’s priorities in ranked order are; #1. Cash is king. #2. Communication. #3. Buy or bury the competition… Yes ‘profit’ is important and it is the reason business exist but it’s not more important than cash– if you have the cash you can run an unprofitable company for years… in fact, there are many companies still in business that have never earned profit; they are in business because they have cash… and businesses fail because they run out of cash…

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Cash is not a number: Cash is a precious substance not a piece of data. Cash equals survival for a business… The real power of cash is that it creates opportunities. When you have cash you can move more quickly than competition. You can exploit opportunities before anyone else and you can create new opportunities by putting cash to work…

According to Mithun Sridharan; cash is king is an adage that is often used to underline the importance of solid cash management. It also is the culprit and used to explain why so many businesses fail. In uncertain economic times, when companies are experiencing tremendous financial pressure; cash management is more important, more relevant than ever… The most important part of cash management is to create a cash-aware business culture and to put into place procedure that protects cash…

In the article Cash Is King by Barbara Friedberg writes: The phrase ‘cash is king’ refers to the ability of a business to have enough cash on hand to cover short-term operations… More businesses fail for lack of cash than for lack of profit… The phrase ‘cash is king’ is the belief that money (cash) is more valuable than any other form of investment tool… It can also refer to balance sheet or cash flow of a business; a lot of cash on hand is normally a positive sign, while strong cash flow allows a company more flexibility in business decisions, potential investments…

As long as a business does not hold too much of it (but that is a subject for another article), cash gives flexibility, competitive advantage… Modern portfolio theory recommends keeping a certain percent of business assets as liquid assets, such as; cash, cash equivalents… although cash holdings normally give a small interest return, it does provide– stability, flexibility… 

According to some experts; holding cash is very important for a stable business even though it currently has virtually no interest paid, e.g.; when asset prices fall cash can cushion losses… holding cash gives psychological peace of mind… cash gives flexibility… According to Morgan Housel; ‘cash isn’t trash’ but there are downsides for holding cash, e.g.; cash is not going to grow at today’s zero interest rates… cash won’t compound very quickly even though inflation is low… you may lose a small amount of purchasing power to inflation by holding cash…

However, like any strategy more isn’t necessarily better and business should take a moderate approach– always have a prudent level of cash on hand… don’t forget about the benefits of cash…

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In the article Cash Is King for Business by Kalen Smith writes: Many business analysts say that poor cash management is number one reason why businesses go bankrupt… While cash is essential for the survival of any business, the true power of cash is its liquidity, e.g.; stock can quadruple in value but it cannot be used to pay your rent… treasury bonds provides a much higher interest rate but the money is tied up for years… CDs pays higher interest rates but you face penalties if withdrawn too soon… The advantage of cash is that it can be spent, however and whenever you want… Hence, prioritize the importance of cash– its availability is essential for a stable and flexible business…

In the article Cash Is Still King for Running a Business by Robin for Stratton writes: ‘Cash is king’ has been a guiding principle of business for generations, but does it still ring true in today’s technology-driven global economy? According to financial experts; cash not only rules the business world, it’s an essential tool in assessing the strength of a company…

According to Leonard Eppel; closely watching cash provides an early awareness of any significant change that might impact the business… cash provides a consolidated snapshot, indicator of every significant source and use of funds… According to Gary W. Patterson; the key is– does the business have enough cash to operate? Hence, the 13- and 26-week cash projections are important indicators because they provide early warning about the cash level of the business… and whether or not the business is sustainable… or must some action be taken to improve cash…

Ironically, there are companies that fail because their business is too successful, e.g.; business may have millions of dollars in contracts but insufficient cash to execute and, if not prepared, it can seriously damage the business…

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In the article Why Cash is King by Scott L. Girard, Jr. writes: Cash is the most flexible form of asset and the easiest to work with… Cash is the life blood of business– it used to buy assets to run a business, to pay employees, to pay bills, to invest in other assets… Cash is king, because it’s– available immediately… everybody accepts it… trust is not an issue.

In financial crises or major disasters, cash is the leader in financial transactions because there is no need for any ‘trust’ behind it– most businesses want cash (paper currency), certified check, direct transfer… In fact most financial crises of the last century could be credited to people and businesses saying they could afford to pay for things they really couldn’t…

In a world dominated by– leverage, payables, receivables… still the only real guarantee to fiscal stability is cash. If you are growing a business, always ensure that you have sufficient cash resources available…

In the article Cashless Economy Is Myth by Tyler Durden writes: Forget what you think you know about– credit, debit cards, PayPal, bitcoin, Apple Pay, other modern conveniences meant to displace physical currency. The truth is that transactional currency ($1 through $20 bills) in circulation per capita today is essentially where it was, inflation adjusted, in 1994: $661 then and $649 today. In fact, small bills ($1 through $20) have grown faster in the last five years than the 20 year average… This year should be no different, with the Fed ordering $49.9 billion of ‘small bill’ currency, which is largest amount since 2010… Also since the $1 bill wears out fast (physically), the Fed’s 2015 order of 2.5 billion bills is higher than 2014 (2.3 billion) and 2013 (1.8 billion)…

So what’s going? Considering all the rhetoric about the rise of shopping on the Internet, ‘app economy’, virtual currencies, incentive program credit, debit cards, online banking… these were all supposed to make paper currency (cash) obsolete. Yet the economy is using more paper currency, even adjusted for inflation, than ever before… A few possible explanations are, e.g.; the underground cash-based economy is growing faster than reported…

Cash is still more convenient than many other payment options for small amounts… Contrary to popular belief, young people (18-24) prefer to use cash more than any other age group… Low inflation and interest rates make holding cash less costly and rise of low-income households, is increasing the uses cash for many things… The reality is that ‘cash is king’ still ring true in today’s technology-driven global economy… cash not only rules the business world but it’s an essential tool in assessing the strength of a business…

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According to Princeton Survey Research Associates International; cash will be the most popular payment method for shoppers buying holiday gifts, with 39% of Americans saying they plan to use it for most of their holiday purchases… This number was about the same as in 2014, when 38% of holiday shoppers said they planned to use cash… Behind cash, the most popular choices for payment, were debit cards, with 31%, followed by credit cards (22%) and checks (3%)…

According to Bank of American Merrill Lynch; make no mistake, no one is getting rich by putting their cash in the bank or money market funds, the investment world’s equivalent of a penny bank… returns have been anemic since the Federal Reserve has kept interest rates near zero for seven years… However, even in the current global economy; Cash is still king in business because of its: Safety, Liquidity, Flexibility…