I know, I know, honestly I always hated it in college too, but I must admit I'd rather study a balance sheet than my portfolio screen of late. OK Ben, let's see what this dreaded monster has to say. I wouldn't want anyone to think that I was losing touch with the trends. Shareholder's value, which we all enjoy, is calculated by subtracting total liabilities from total assets, but we use current numbers to assess what a company's landscape is today. The more liquid assets, the more benefit to shareholders, in the way of dividends or stock buybacks.
Nothing makes a company more valuable than cold hard cash.
Investors love to see stacks and stacks hidden under the mattress for a rainy day. Cash is the ultimate liquid asset, allowing a company to acquire, build out, woo employees and mail big checks to investors. A company dabbling in this arena is a great sign of strength and growth potential. Usually if a company has an excess of the green stuff, they will allot cash to bonds with a duration of less than a year. The money consequently earns a higher return than a money market and can be turned liquid with a little effort.