U.S. Businesses Are Not Overleveraged

Michael Mandel

Interesting news from S&P:

New York, July 5, 2005 - Attributing it to strong earnings and reduced corporate spending, Standard & Poor's announced today that cash and equivalent levels in the S&P 500 Industrials has reached an all-time high. Cash and equivalent is the sum of cash on hand, as well as short-term investments that a company classifies as a current asset. Standard & Poor's is the world's leading provider of independent investment research, indices and ratings.
"The record cash levels in the S&P 500 Industrials are the direct result of the 12-consecutive quarters of double-digit earnings gains and the lack of new investment," says Howard Silverblatt, Equity Market Analyst at Standard & Poor's. "The bulge in cash is permitting companies to simultaneously finance record levels of stock buybacks and dividends."
According to Standard & Poor's data, cash is 7.7% of market value, a level not seen since 1988. In addition, the cash to Long Term Debt (LTD) comparison is near its highest point since 1980, when Standard & Poor's began to track the statistic. The cash to combined current liabilities and LTD is currently 50% above its 25-year average.

Not the sign of an indebted business sector.