How do companies save their excess free cash flow?


I read somewhere that most publicly listed companies these days are sitting on vast heaps of cash, hence why share buy backs are a common occurrence.

Where is this cash sitting from an accounting point of view – the bank, or is it invested somewhere?

Also is there anything stopping companies from rolling over their excess cash reserves to future quarters to massage their profit figures?

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Posted by (Questions: 43, Responses: 53)
Posted on 06/17/2017 11:12 AM
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It’s mostly short-term liabilities so money market funds and things like that. Companies can’t “roll over” past profits to massage future profits. Retained earnings are the residual of net cash flows in a certain period. What’s retained in the past and unspent is just added to any current net cash flow to retained earnings in future periods. This isn’t new profits. It is simply retained earnings from past periods.

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Cullen Roche Posted by (Questions: 10, Responses: 1864)
Answered on 06/17/2017 2:54 PM