U.S. Businesses Are Not Overleveraged

Posted by: Michael Mandel on July 06

Interesting news from S&P:

New York, July 5, 2005 - Attributing it to strong earnings and reduced corporate spending, Standard & Poor’s announced today that cash and equivalent levels in the S&P 500 Industrials has reached an all-time high. Cash and equivalent is the sum of cash on hand, as well as short-term investments that a company classifies as a current asset. Standard & Poor’s is the world’s leading provider of independent investment research, indices and ratings.
“The record cash levels in the S&P 500 Industrials are the direct result of the 12-consecutive quarters of double-digit earnings gains and the lack of new investment,” says Howard Silverblatt, Equity Market Analyst at Standard & Poor’s. “The bulge in cash is permitting companies to simultaneously finance record levels of stock buybacks and dividends.”
According to Standard & Poor’s data, cash is 7.7% of market value, a level not seen since 1988. In addition, the cash to Long Term Debt (LTD) comparison is near its highest point since 1980, when Standard & Poor’s began to track the statistic. The cash to combined current liabilities and LTD is currently 50% above its 25-year average.

Not the sign of an indebted business sector.

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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