Why is it bad for a company to have too much cash?

Question

Why is it bad for a company to have too much cash?

Answer 1

it would be hard to keep it somewhere safe after it builds up too much

Answer 2

If you have too much cash on hand, you are not putting it to good use. Idle cash can represent lost opportunities. I'm not saying you should spend every dime, but you need to put you cash to work. Here are some potential uses:

1. Pay down debt to minimize interest expense

2. Put it in the stock market and let it make money for you

3. Reinvest it in the company in additional equipment, labor, materials, etc.

4. Pay a dividend to keep shareholders happy

Answer 3

If it is a publicly held company then it will become a tempting target for a hostile take over.