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Hordes of hoarders
|Last Edited||RP May 07, 2012 01:39pm|
|News Date||Monday, January 30, 2012 12:40:00 AM UTC0:0|
|Description||Companies’ growing cash piles are irking shareholders and stunting growth |
Call it the $1,700bn problem. Companies in the US are flush with cash and are paying out a smaller proportion of their earnings as dividends than ever before. Much the same can be said for western Europe. Governments and households on both sides of the Atlantic are meanwhile strapped for cash. This cannot persist much longer.
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At present, cash accounts for more than 6 per cent of the assets on the balance sheets of US non-financial companies. That is the highest in at least six decades, and represents the fruit of record high profit margins. Companies cut costs through redundancies during the post-Lehman economic swoon, while negligible interest rates reduced their borrowing costs. As a result, US corporate profits are higher, as a share of gross domestic product, than at any time since 1950.