War Chest

DEFINITION of 'War Chest'

A colloquial term for the reserves of cash set aside or built up by a company to take advantage of an unexpected opportunity. While a war chest is typically used for acquisitions of other companies or businesses, it can also be used as a buffer against adverse events during uncertain times. A war chest is often invested in liquid short-term investments, such as treasury bills and bank deposits, which can be accessed on demand.

BREAKING DOWN 'War Chest'

A war chest that has swelled up too much can sometimes be viewed as an inefficient way of deploying capital. While investors may be willing to give a company with a huge cash hoard the benefit of the doubt for some time, if the cash balance continues to grow well beyond the company's normal operating requirements, its investors may clamor for a share of it.


If the company is unable to deploy its war chest efficiently, it may consider distributing part of its cash holdings to its shareholders. Such return of capital to shareholders is usually achieved either through a special dividend distribution, an increase in the regular dividend, a share buyback or a combination of these measures.

RELATED TERMS
  1. War Damage Insurance Corporation

    A government financial protection arm created during World War ...
  2. Price War

    When companies continuously lower prices to undercut the competition. ...
  3. War Economy

    The organization of a country's production capacity and distribution ...
  4. War Exclusion Clause

    A clause in an insurance policy that specifically excludes coverage ...
  5. War Risk

    1. The possibility that an investment will lose value because ...
  6. War Bond

    Debt securities issued by a government for the purpose of financing ...
Related Articles
  1. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  2. Investing

    Financial History: The Evolution Of Accounting

    Follow accounting from its roots in ancient times to the profession we now depend on.
  3. Managing Wealth

    4 Reasons Why Investors Like Buybacks

    From a financial perspective, buybacks benefit investors by improving shareholder value, increasing share prices, and creating tax beneficial opportunities
  4. Markets

    Which Is Best: Cash Dividend Or Stock Dividend?

    Cash dividends are paid to shareholders when a company decides not to use the money for operations, but instead, transfer economic value to its shareholders.
  5. Investing

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  6. Insights

    Original Star Wars Trilogy Returning to Theatres in August

    The oldest three Star Wars movies return to the big screen in August in a special program called "Return of the Trilogy".
  7. Trading

    How Global Events Affect The Forex Market

    Learn how politics, war and natural disasters move the forex market, and how you should respond.
  8. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  9. Markets

    Will Star Wars Be Killed By Its Own Hype? (DIS, HAS)

    As Dec. 18 draws near, the expectations around Star Wars are ballooning. Will the movie franchise be able to live up to expectations?
  10. Investing

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
RELATED FAQS
  1. How did World War II impact European GDP?

    Understand the effect of World War II on the European gross domestic product and what foreign and domestic factors influenced ... Read Answer >>
  2. Why does the IRS withhold income taxes from employee paychecks?

    In the midst of WWII, the U.S. government ran into trouble funding the war effort. The problem did not originate from citizens ... Read Answer >>
  3. What does "buy on the cannons, sell on the trumpets" mean?

    All the events and news that happen around the world can have a great impact on the stock market. Very often, if a war breaks ... Read Answer >>
  4. Where exactly do dividends come from?

    Learn about sources of cash dividend, such as operational, financing and investing cash flows, as well as issuances of new ... Read Answer >>
  5. Which is better a cash dividend or a stock dividend?

    The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: ... Read Answer >>
  6. Are dividends considered an expense?

    Learn how dividends are accounted for and why cash or stock dividends on common or preferred shares are not considered an ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center