What could a company do with excess cash on the balance sheet?

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What could a company do with excess cash on the balance sheet?..

Answer / archit agrawal

1. Pay dividend : Argument for paying dividend
a) Company can not find opportunities where it can earn more than cost of capital, so it makes sense to return money to shareholders.

b) Company is in stagnant market & is averse to diversification.

Against:
Not pay dividend keep it for good period, because if you pay dividend then you will attract shareholders who love dividends then from next time onwards you will be under compulsion to pay dividends.

If good opportunity comes in future, it will have to look to capital market to fund it, which will result in

2. Reduce existing debt.
This way company can make the company less risky and will reduce cost of equity, though cost of capital would be same.

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What could a company do with excess cash on the balance sheet?..

Answer / narendra singh

if company is not able to earn more then its cost of
capital it should issue bonus share instead of dividend
through this way it can attract to new shareholder and keep
happy to existing one and can waight sometime for future
oppotunities

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What could a company do with excess cash on the balance sheet?..

Answer / vasavi

There really is no such thing as 'excess cash.' One of the
above options must be exercised by the end of the year
close. Otherwise they offer Secret bonuses and screw the
shareholders.

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1 No

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