Cash is king
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"Cash is king" is an expression sometimes used in analyzing businesses or investment portfolios. It may refer to the importance of cash flow in the overall fiscal health of a business. For investors it may also describe times when it is advantageous to have a large percentage of cash or short-term debt instruments available either due to falling financial markets or due to the availability of investment opportunities.
The phrase is a favorite of Alex Spanos and has sometimes appeared in Motley Fool articles and commentaries. It describes the importance of sufficient cash as an asset in the business for short term operations, purchases and acquisitions. A company could have a large amount of accounts receivables on its balance sheet which would also increase equity, but the company could still be short on cash with which to make purchases, including paying wages to workers for labor. Unless it was able to convert its accounts receivable and other current assets to cash quickly, it could fail and be technically bankrupt despite a positive net worth.
[edit] External links
- Fool on the Hill β Cash is King - Motley Fool opinion article stressing the importance of examining cash flow statements.
- Cash is King Again - Motley Fool article describing the advantages of having cash available to invest.
- Cash is king in a recession!
