A trickle of corporate cash is beginning to flow into acquisitions, business launches and other capital expenditures, according to the 2011 AFP Liquidity Survey by the
Thirty percent of corporate finance executives said that in the past 12 months, their company has begun investing money that had sat on the sidelines for the past six years. And 56% of the companies that increased cash deployment said they did so because they believe their operating cash flow improved.
By comparison, in last year’s survey, the organizations that began to deploy cash said they did so only to “maintain operations and get through the recession” or “for working capital improvement.”
“While the survey shows very conservative behavior, we believe it provides hope for intermediate-term prospects,” said Jim Kaitz, president and CEO of AFP. “Some companies are beginning to spend cash to build their operations. Others are seeing cash levels rise because their business picture is improving. As companies find opportunities to deploy this cash in the coming months, we will see the economy gain some momentum.”
Elyse Weiner, head of global liquidity and investments with Citi’s global transaction services, which was a sponsor of the survey, said: “We are heartened by the encouraging signs revealed in the survey, which show that treasurers are seeking opportunities for enterprise-wide liquidity efficiency, while still emphasizing diversified investment portfolios.”
However, looking ahead, corporate treasurers are more cautious, with 24% of investor organizations expecting to further reduce cash reserves in the coming year. Of those, 42% expect to increase spending, 23% plan to pay back debt and 16% are looking to acquire a business or launch a new operations.
Eighty-two percent of these companies planning to put their capital to work said it will be due to expected improvements in their cash flows.
