What Is Cash Is King?

"Cash is king" is a slang term reflecting the belief that money (cash) is more valuable than any other form of investment tools, such as stocks or bonds. This phrase is often used when prices in the ꧅securities market are high, and investors decide to save their cash for when prices are cheaper🉐.

It can also refer to the 澳洲幸运5开奖号码历史查询:balance sheet or 澳洲幸运5开奖号码历史查询:cash flow of a business; a lot of cash on hand is normally a positive sign,🔴 while strong cash flows allow a company more flexibility in regards to business decisions and potential investments.

A third use of the phrase can refer simply to a form of payment. Many businesses only accept cash as a form of payment, as opposed to 澳洲幸运5开奖号码历史查询:credit cards or checks, hence the phrase "cash is king."

Understanding Cash Is King

In the world of investments, investors who favor the "cash is king" phrase may opt to buy 澳洲幸运5开奖号码历史查询:short-term debt instruments or 澳洲幸运5开奖号码历史查询:certificates of deposit (CDs) versus buying hig💖h-priced securities. If employing a strategy of holding a lot of cash, an investor should work with a financial planner to estimate future cash needs and rates of inflation.

Cash, cash equivalents, and some short-term 澳洲幸运5开奖号码历史查询:debt instruments lose spending power over time if they do not offer a return that keeps up with the rate of 澳洲幸运5开奖号码历史查询:inflation. This can cause hoꦡlders of cash as a long-term investment to experience a negative return over time.

For example, a dollar today is worth more than a dollar tomorrow, due to the 澳洲幸运5开奖号码历史查询:time value of money. It is wisest to invest cash to ไwhere there is a return equal tꦰo or above inflation, instead of leaving it sitting idle.

"Cash is king" also refers to the ability of a corporation or a business to have enough cash on hand to cover short-term operations, buy assets, such as equipment and machinery, or acquire other facilities. More businesses fail for lack of cash flow than for lack of profit.

A significant level of cash also allows businesses to weather economic downturns when people are in savings mode and demand for a business's products or service may be low or non-existent. The higher the level of cash, the easier a business will be able to pay its operating𒐪 expenses and🐽 debt obligations even if revenues are low.

Real World Examples

In recent years, since the global financial crisis, tech companies such as Apple (AAPL) and Amazon (AMZN) have been hoarding cash on their balance sheets as opposed to 𒉰spending it. In 2017, market disruptor Amazon made an extremely large cash outlay to purchase Whole Foods, sending panic through the grocery industry and putting the ꦆstock of companies such as Kroger into a temporary tailspin. Cash gave Amazon the power to make that large purchase and disrupt the markets.

Apple is also known for having a large amount of cash. At the end of Q3 2022, Apple had $179 billion in cash, which is a staggering number. With that amount of cash the company can pretty much do anything; purchase a variety of businesses, invest in 澳洲幸运5开奖号码历史查询:research and development (R&D), expand stores, and stay afloat without any issue during economic downturns. However, given the dꦯemand for Apple products, it is unlikely it would see a significant drop in demand for its pro🧸ducts even during a downturn.