Maybe someone can explain this, because I never understood it. When a company sits on so much cash, I guess it doesn't mean cash which is liquid, but rather a variety of assets, right?
So when they just have to pull x billions out, it's not just liquid assets, but they will have stage and sell assets representing those funds.
So since it's not just cash, how does a company of this size, then determine what assets to sell? And if those assets are actually invested in something, or representing an entity of some sorts, how do they assess whether or not it will cause any damage or loss of profitability? The crux is, is the risk two fold? First let go of whatever the assets were invested in (one), and then buy a new company and hope it has ROI (two).
Or is it actually possible to have 1.5 billion dollars laying around in cash somehow? I know money is a made up idea, but that is still a big number for a bank/banks/asset holding company to just say good for and expect some kind of real monetary tangible value behind the symbolic currency.
> When a company sits on so much cash, I guess it doesn't mean cash which is liquid, but rather a variety of assets, right?
Cash is a very specific thing on a balance sheet. It has to be cash or very close to cash. "Equivalent", something like a <90d treasury that has virtually zero interest rate risk.
So when someone says "Google has 100B cash" it would mean literally cash or close enough to cash that it doesn't matter.
You'll note, if you read the 10Q, it's also wrong. Google has 30B in cash and cash equivalents, and an additional 90B in marketable securities - stocks, and bonds with >90d maturity.
That said, "marketable securities" are extremely liquid.
> Or is it actually possible to have 1.5 billion dollars laying around in cash somehow?
Yes? Depending on what you mean by "laying around in cash". It's not literal physical dollar bills, it's numbers in a computer.
1.5B is not much for a company that size. I'd image that is payroll and accounts payable for like a week or two?
> I know money is a made up idea, but that is still a big number for a bank/banks/asset holding company to just say good for and expect some kind of real monetary tangible value behind the symbolic currency.
Bank of America alone has like 2 trillion in US deposits.
Most larger companies will use treasury management software within their finance organization to handle these issues (asset mix, risk, prediction, transfer, etc...).
Scanning the players will show you how some of them solve some of the problems you mention.
>Or is it actually possible to have 1.5 billion dollars laying around in cash somehow?
Yes. 1.5 billion is less than Google's weekly operating expense.
>So since it's not just cash, how does a company of this size, then determine what assets to sell? And if those assets are actually invested in something, or representing an entity of some sorts, how do they assess whether or not it will cause any damage or loss of profitability?
There's a lot of smart people under CFO that determine that.
It’s described in various articles as $121bn of cash, cash equivalents (debt instruments and marketable securities with maturities of < 90 days) and other short-term investments (which I think includes government bonds.) Short term investments make up more than 80% of it.
Alphabet has 190k employees. Let's assume the average salary is 5k/month, that's already close to a billion just going to employees accounts each month.
Maybe it’s semantics, but generally with fund allocation when you’re deploying more than 1% of your AUM towards a single thesis that’s a significant bet.
The closest equivalent to "AUM" for a company like that would be the market capitalization, not cash reserves, so over 1.5 trillion.
Then again, shareholders usually have less risk tolerance with companies than investors with hedge funds, so the two aren't really comparable either. (But I assume your 1% number is for more risk-averse funds? Hedge funds regularly make much bigger bets than that)
