A recent study done by Association of Financial Professional’s (AFP) depicts an unmatched challenge of U.S. companies during the mix of the Covid-19 pandemic. AFP’s corporate cash indictors showed that 32% of U.S. companies are planning on drawing down on cash in the upcoming quarter, to help sustain feasibility. This illustrates that many companies are expecting the weakening of business performance and reduction in market demand. The draw-down will help offset the decrease of cash inflows of reduced sales and increased constraints of financing capabilities during market uncertainties. This also can indicate that some companies may decide to reduce or eliminate long-term liabilities. However, according to the AFP’s analysis, few companies are tending to increase cash holdings and create a defense mechanism to shelter itself from worsening economic conditions. You may find the additional results from clicking on the following: AFP Research
In comparison to financial crisis of 2008-2009, the covid-19 impact is more painful due it’s midpoint impact on society. Financial crisis was focused on real estate sector and which spilled over to other parts of the aggregated economy. Covid-19 pandemic is impacting almost all sectors from retail, food, commercial real estate, and so on. Due to its nature of impact, cash has become more integral part of the challenge for many companies leading to challenging decisions on how to manage cash outflows against slowdown of cash inflows.
Mustafa Chaudhry, CTP
Passionate about finding financial efficiency and data-driven decisions
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