Cash Position

AAA

DEFINITION of 'Cash Position'

The amount of cash that a company, investment fund or bank has on its books at a specific point in time. The cash position is a sign of financial strength and liquidity. In addition to cash itself, it will often take into consideration highly liquid assets such as certificates of deposit, short-term government debt and other cash equivalents.

INVESTOPEDIA EXPLAINS 'Cash Position'

For companies, a large cash position is often a powerful signal of financial strength, while a small cash position is a potential warning sign. This is because cash is needed to fund operations and to pay off obligations. However, too large of a cash position can often signal waste, as the funds are generating very little return.

A Bank is generally required to have a minimum cash position which is based upon the amount of funds it holds. This ensures that the bank has the ability to pay out its account holders if they demand funding. When an investment fund has a large cash position, it is often a sign that it sees few attractive investments in the market and is comfortable sitting on the sidelines.

RELATED TERMS
  1. Liquid Asset

    An asset that can be converted into cash quickly and with minimal ...
  2. Cash Equivalents

    Investment securities that are short-term, have high credit quality ...
  3. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  4. Cash Cow

    1. One of the four categories (quadrants) in the BCG growth-share ...
  5. Liquidity

    1. The degree to which an asset or security can be bought or ...
  6. Liquidity Cushion

    A reserve fund for a company or individual made up of highly ...
Related Articles
  1. Warning Signs Of A Company In Trouble
    Professionals

    Warning Signs Of A Company In Trouble

  2. Conglomerates: Cash Cows Or Corporate ...
    Investing Basics

    Conglomerates: Cash Cows Or Corporate ...

  3. Understanding Financial Liquidity
    Options & Futures

    Understanding Financial Liquidity

  4. Spotting Cash Cows
    Investing

    Spotting Cash Cows

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center