Moody's Corporation (NYSE:MCO) Says US Corporations Hoarding $1.84 Trillion
On Wednesday July 19, Moody's Corporation (NYSE:MCO) announced that US non-financial corporations were hoarding about $1.84 trillion in cash as at the end of 2016. Technology firms led by Apple Inc. (NASDAQ:AAPL) were leading the pack of corporations holding cash outside the US.
Although these firms might report their cash reserves as being held in various corporate accounts, the money is usually employed in other sectors of the economy. The money held by the top five technology corporations, which are Apple, Microsoft Corporation, Google’s parent Alphabet Inc, Oracle and Cisco Systems, amounts to $594 billion.
Technology companies make a large percentage of their revenues in overseas countries; hence, they only report such earnings in the US when they transfer the funds back to the US. Such companies prefer to hold their cash reserves in foreign countries in order to avoid taxation back in the United States.
Moody’s stated that investment-grade corporations were holding about $1.6 trillion in cash and that the minimum cash held by the top 50 corporations is $6.12 billion. According to Moody’s estimates, the cash held by corporations overseas amounts to $1.3 billion.
Although these figures might cause alarm within some quarters due to the tax that is not paid by companies holding cash overseas, the figures have minimal impact on most Americans. This is largely because the corporations actually employ the cash investing in the US, although they report the ownership of their cash reserves as being in overseas accounts.
Moody’s Corporation continues to lead the field in the global credit-rating industry, but the question remains as to whether Moody’s is a good investment now.
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