Cash is King in Corona Times

Top 10 Indian Cash rich Companies ironically are all banks. The only non-banking companies worth its name in the top 25 cash rich Indian company is Infosys and Wipro. If we go global, Alphabet apparently has $117 billion in cash, while Apple has $102 billion. Its liquid reserves have risen by almost $20 billion since the end of 2017, while Apple’s fell from a peak of $163 billion. While growing cash can indicate the company is generating strong revenues, if cash is a permanent fixture on a balance sheet, investors will wonder why the money is not being put to work.  We all know the boards are always passionate about growth and most of the times cash is taken out to grow further.

 CFO’s world over may not have had such a challenging time as in these Corona times managing the liquidity need of the company. While debt may be easily available if you have a good balance sheet, with limited visibility on the business plans and uncertainty looming large, they are struggling between the decision of taking loans and scaling down the cash needs. Both the options come with many pros and cons and its indeed a fine balancing act.

Time is ripe to explore and discover many non-traditional means like barter systems, result linked spends, Innovative cash discounts, Debt Covenants etc. Companies are setting up a cash war room with “spend control tower” to help implement aggressive curbs on spending throughout the organization. Scenario planning and articulating clear thresholds or trigger points to determine what financial actions the company will take and when needs to be done with the Operational teams is also becoming important.

Taking advantage of the situation, it is also time to clean up and strengthen the system like the Indian railways doing the critical track upgradations while the traffic is negligible. Depending on the companies need, much can be done like reviewing goodwill impairments; refinancing debt; reducing inventory, accounts-payable, and accounts-receivable terms; and so on. This crisis can also open-up opportunities for Acquisitions or Mergers at an appropriate time and our own financial muscle and agility once done up will help in making the right move at the right time.

While I was diving deep into the Corporate Finances, for the reader of this article, it may be interesting to note that almost all of the principals, I discussed is very much applicable to you as an individual also. So absorb, ponder, plan, warm up and take advantage of all these in your personal financial planning as well.

Stay Safe, Survival may not be of the fittest but mostly will be of the most adaptive!!

Opinions/ views expressed in the article is of the author and has no relation to present / past employers.

Ashok Cherian

Chief Information Officer @ Page industries Ltd.

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