U.S. companies continue to hold record amounts of cash, according to a study by Standard & Poor’s Ratings Services, and the high levels show no sign of dropping. Nonfinancial corporations rated by Standard & Poor’s held $1.25 trillion in cash and short-term investments at the end of 2011, up 41% from the level at the end of 2006. Their ratio of cash and short-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-grade companies, though speculative-grade issuers increased their cash reserves as well. Cash and equivalents recorded by investment-grade issuers showed a compound annual growth rate (CAGR) of 8.7% over the past five years, while speculative-grade issuers recorded a 2.3% CAGR.