War Chest

AAA

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.

INVESTOPEDIA EXPLAINS '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. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. War Babies

    A name given to securities in companies that are defense contractors. ...
  4. White Knight

    A white knight is an individual or company that acquires a corporation ...
  5. Crown Jewels

    The most valuable unit(s) of a corporation, as defined by characteristics ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
Related Articles
  1. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

  2. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. How Mergers and Acquisitions Can Affect ...
    Investing Basics

    How Mergers and Acquisitions Can Affect ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center