Excess Cash is an additional amount of cash beyond what a
company normally needs to have on hand (see above). In
that section I showed that there should be no
excess cash in your bank accounts. Zero. None. Zilch. Zip. Nada. If you have
it, you have something very wrong with your cash management system. And you
better fix it – and fast.
Because, in addition to what I covered in the section on
cash, your excess cash hurts your business in three more ways:
1.
It lowers your return on assets
2.
It increases your cost of capital
3.
It increases overall risk by destroying business
value and can create an overly confident management team
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