Explanation of Cash:
Also called Cash and Cash Equivalents and listed on the Balance Sheet, the Cash
is simply the actual cash the company has on hand.
Importance of Cash:
Just as you might have a bank account with cash in it, so do
companies. If you have earnings coming to you, you might keep some
of that cash in a savings account for quick access when you need it. In
addition to saving the cash, you might use some of it to pay bills or pay off
debt. You might also use some of the cash and invest it to get a better
return on your money rather than just keeping it all in a savings
account. Companies have to make exactly the same decisions with their
cash, and how they use that cash depends on the financial condition of the
company. You might have heard the phrase "Cash is King".
Simply put, companies with plenty of cash have plenty of opportunities.
They enter into new and emerging industries by buying other companies outright,
or at least acquire assets to give them the competitive edge.
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