Companies Could Spend Accumulated Cash Soon, Survey Finds

If all goes well, U.S. businesses may be set to deploy some of their cash piles on capital expenditures, wage increases, dividends and buyback and mergers and acquisitions, according to a recent report from the Association for Financial Professionals (AFP).

The organization saw companies accumulating cash and short-term investment holdings at a lesser pace in the last quarter of 2017. AFP contends this could be a sign that companies are ready to spend.

"A strong domestic and global economy, and the most significant change to the United States tax code in more than 30 years, are the likeliest explanations," AFP said in a statement.
In a quarterly survey, AFP said respondents expected to deploy a minimal amount of cash during the first three months of the year.

Thirty-seven percent of respondents said their firms held larger cash and short-term investment balances at the end of the fourth quarter for 2017 than they did the prior quarter, while 22% said they reduced cash holdings in the prior three months, AFP said. Also, 24% anticipate expanding cash and short-term investment balances over the next three months, while 25% plan to reduce these balances.

"Treasury and finance leaders are still analyzing the new tax bill and are not ready to commit to aggressive spending, but many are weighing plans to deploy cash," said Jim Kaitz, president and CEO of the AFP. "Given the new era of corporate taxation, not to mention a healthy economy and increasing wage pressure due to a shallow labor pool, it would come as no surprise."

– Nicholas Stern, managing editor