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About 30% of finance pros are putting cash to work in growth initiatives

A trickle of corporate cash has begun flowing into investment projects such as acquisitions, business launches and other capital expenditures, according to a survey released today by the Association for Financial Professionals (AFP). About thirty percent of corporate finance executives say that in the last 12 months their organizations have begun to use the cash that had been accumulating on the sidelines for the last six years.

The 2011 AFP Liquidity Survey (, underwritten by Citi, represents the sixth time AFP has conducted this annual survey of CFOs, treasurers and other financial executives. The percentage of organizations currently reporting a decline in cash reserves is the largest in the survey's history.

Although the main reason for a decline in cash was a decrease in operating cash flow stemming from the recession, AFP noted that thirty percent of reporting executives specifically indicated that that their organizations had begun to put cash to work in growth initiatives. This change in behavior represents a small but noteworthy departure from AFP's previous liquidity surveys.

"While the survey shows very conservative behavior, we believe it provides hope for intermediate term prospects," said Jim Kaitz, AFP's president and CEO. "Some companies are beginning to spend cash to build their operations. Others are seeing cash levels rise because their business picture is improving. As companies find opportunities to deploy this cash in the coming months, we will see the economy gain some momentum."

For many of the companies that did increase cash reserves, their rationale reflects an improved business climate: About 56 percent of organizations that increased cash holdings did so because their operating cash flow had improved. This is in contrast to last year's survey, which found that the organizations that increased cash holdings did so to "maintain operations and get through the recession" or "for working capital improvement."

"We are heartened by the encouraging signs revealed in the survey, which show that treasurers are seeking opportunities for enterprise-wide liquidity efficiency, while still emphasizing a diversified investment portfolio," said Elyse Weiner, Head of Global Liquidity & Investments with Citi's Global Transaction Services. "As a sponsor of this year's survey and a world leader in liquidity management solutions, Citi has long supported companies as they expand their global footprint. Our latest technological advances will provide companies with important opportunities to manage their global cash more effectively."

Looking ahead, executives remain cautiously optimistic. About 24 percent of net investor organizations and about 26 percent of net borrower organizations say they expect to further reduce cash reserves in the coming year. Of those, 42 percent expect to increase spending, 23 percent expect to pay back debt and 16 percent expect to acquire a business or launch a new operation.

Of respondents who think their cash holdings will expand, the vast majority (82 percent) believe the expansion will be due to better operating cash flow.

Within the U.S., organizations typically hold cash in bank deposits, money market mutual funds and U.S. Treasury securities. Outside the U.S., they typically place it in bank deposits, the survey found. The survey also covered changes by international region as well as short-term investment policies and vehicles.

AFP conducted the survey in May 2011, generating 364 responses. The survey respondents were senior finance and treasury executives from a broad range of companies - typically U.S.-based multinationals with a median of $2 billion in revenue.
Download key findings from the AFP 2011 Liquidity Survey on

The Association for Financial Professionals (AFP) is the daily resource for a network of more than 16,000 treasury and finance professionals. Headquartered outside Washington, DC, AFP provides members with news, economic research and data, treasury certification programs, networking events, financial analytical tools, training, and public policy representation to legislators and regulators.
AFP's global reach extends to over 150,000 treasury and financial professionals worldwide, including AFP of Canada; London-based gtnews, an on-line resource for the treasury and finance community; and bobsguide, a financial IT solutions network.

Lundi 4 Juillet 2011