U.S. companies continue to hold record amounts of cash,according to a study by Standard & Poor'sRatings Services, and the high levels show no sign of dropping.Nonfinancial corporations rated by Standard & Poor's held $1.25trillion in cash and short-term investments at the end of 2011, up41% from the level at the end of 2006. Their ratio of cash andshort-term investments to total assets increased to more than 8.6%from 7% between 2006 and 2008.

The increase in liquidity was greater for investment-gradecompanies, though speculative-grade issuers increased their cashreserves as well. Cash and equivalents recorded by investment-gradeissuers showed a compound annual growth rate (CAGR) of 8.7% overthe past five years, while speculative-grade issuers recorded a2.3% CAGR.

Companies that are rated A or higher held 54% of the total cashand short-term investments as of 2011, even though they compriseonly 10% of issuers. Companies rated B and lower held only 10% ofthe cash and short-term investments, though they make up 46% ofissuers.

Technology and healthcare companies hold the most cash,according to S&P, although the auto sector has built up itscash position and now holds 7% of the total corporate cash supply.Auto companies traditionally need more cash to deal with sharpdownturns in production, and the sector hase increased its cashbalances from 16% to 19% of total assets in the past five years.The healthcare sector holds 14% of its total assets in cash, whilethe technology sector holds 24%.

The increase in technology companies' liquidity reflects agrowth in overseas cash, which made up 91% of total cash balancesin 2011, up from 68% in 2006, according to the report. Cisco, forexample, has chosen to issue debt to maintain its domestic supplyof cash rather than repatriate cash from overseas and subject thefunds to U.S. tax rates that can be as high as 35%.

The 10 companies in the study that had the most cash held 77% oftheir cash overseas. According to the study, given the high U.S.tax rate, acquisitions of foreign companies have become a moreefficient use of capital, such as Microsoft's $8.5 billionacquisition of Skype.

Only about 9% of the U.S. consumer products companies analyzedheld more than $1 billion in cash and equivalents at the end of2011. Coca-Cola posted the largest increase among consumer productscompanies, building its cash base from $3 billion at the end of2006 to $14 billion at the end of 2011.

Companies are likely to hang on to their cash as they ride outeconomic woes in the U.S., Europe and China. S&P projects thatliquidity among investment-grade issuers may decline in the longterm, though, especially if Congress were to give companies a breakon repatriation taxes, as it did in 2004 with the American JobsCreation Act.

For an update on the latest information on corporate cashfrom the Fed's Flow of Funds, see Corporate Cash Revised Lower. For a look at what IRS datasay about global cash holdings, see Corporate Cash Even Bigger? And for a look at how companiesare investing their short-term cash, read No Safe Harbor for Cash.