"Cash is king" is a

colloquial Colloquialism (), also called colloquial language, everyday language or general parlance, is the linguistic style used for casual (informal) communication. It is the most common functional style of speech, the idiom normally employed in conver ...

phrase sometimes used in analyzing businesses or investment portfolios. It may refer to the importance of

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

in the overall fiscal health of a

business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...

. In

corporate finance Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and anal ...

, the expression refers to the fact that only future free

s or

dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...

s are relevant for

valuation (finance) In finance, valuation is the process of determining the present value (PV) of an asset. In a business context, it is often the hypothetical price that a third party would pay for a given asset. Valuations can be done on assets (for example, inve ...

and not, for example, accounting earnings. For investors it may also describe times when it is advantageous to have a large percentage of cash or

short-term debt The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a compo ...

instruments available either due to falling financial markets or due to the availability of investment opportunities. The concept of "cash is king" describes the importance of sufficient cash as an asset in the business for short term operations, purchases and acquisitions. A company could have a large amount of

accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised b ...

s on its

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

which would also increase

equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...

, but the company could still be short on

cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-imm ...

with which it can make purchases, including paying

wage A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', ''prevailing wage'', and ''yearly bonuses,'' and remuner ...

s to workers for

labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labour ...

. Unless it was able to convert its

and other

current asset In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...

s to cash quickly, it could fail and be technically

bankrupt Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debt ...

despite a positive net worth.

History

The origin of "cash is king" is unclear. The phrase became popularized following the global stock market crash of 1987 by

Pehr G. Gyllenhammar Pehr Gustaf Gyllenhammar (born 28 April 1935) is a Swedish businessman. He is mainly known for his 24 years as CEO and chairman of Volvo, between 1970 and 1994. In the early 1980s he took the initiative for the European Round Table of Industriali ...

, then

CEO A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...

of Swedish car group

Volvo The Volvo Group ( sv, Volvokoncernen; legally Aktiebolaget Volvo, shortened to AB Volvo, stylized as VOLVO) is a Swedish multinational manufacturing corporation headquartered in Gothenburg. While its core activity is the production, distributio ...

. Since 2000, the expression, "cash is king", has occasionally appeared in articles on the investing website ''

Motley Fool The Motley Fool is a private financial and investing advice company based in Alexandria, Virginia. It was founded in July 1993 by co-chairmen and brothers David Gardner and Tom Gardner, and Erik Rydholm, who has since left the company. The compa ...

'', and is part of radio host

Dave Ramsey David Lawrence Ramsey III (born September 3, 1960) is an American personal finance personality, radio show host, author, and businessman. An evangelical Christian, he hosts the nationally syndicated radio program ''The Ramsey Show''. Ramsey has ...

's hourly show introduction The phrase was frequently used by billionaire property developer

Alex Spanos Alexander Gus Spanos (September 28, 1923 – October 9, 2018) was an American billionaire real estate developer, founder of the A. G. Spanos Companies, and the majority owner of the San Diego / Los Angeles Chargers of the National Football Lea ...

, whose 2002 book, ''Sharing the Wealth: My Story'', includes the phrase, used as a chapter title, and later adopted by another

NFL The National Football League (NFL) is a professional American football league that consists of 32 teams, divided equally between the American Football Conference (AFC) and the National Football Conference (NFC). The NFL is one of the major ...

team owner of Greek heritage,

Jack Welch John Francis Welch Jr. (November 19, 1935 – March 1, 2020) was an American business executive, chemical engineer, and writer. He was Chairman and CEO of General Electric (GE) between 1981 and 2001. When Welch retired from GE, he receive ...

. Widely used during the global

financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...

and the

Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...

that followed, the phrase was also often used to describe companies which could avoid share issues or bankruptcy. Commercial establishments that accept only cash payments have become suspect in the modern age. ''

Gothamist Gothamist LLC is the operator, or in some cases franchisor, of eight city-centric websites that focused on news, events, food, culture, and other local coverage. It was founded in 2003 by Jake Dobkin and Jen Chung. In March 2017, Joe Ricketts, ...

'' co-founder and publisher

Jake Dobkin Jacob "Jake" Dobkin is an American journalist, blogger, author, and co-founder of Gothamist. He is currently a director of New York Public Radio. Biography Dobkin is a native of New York City and grew up in Park Slope, Brooklyn. He graduated fr ...

wrote in 2014 about cash-only restaurants: "I figured that they must be running a tax scam, underreporting their sales to the state and pocketing the difference—maybe even laundering money". The phrase is often used by convicted

jewel thief ''Jewel Thief'' is a 1967 Indian Hindi-language Spy film, spy thriller (genre), thriller heist film directed by Vijay Anand (Hindi film maker), Vijay Anand. The film stars Ashok Kumar, Dev Anand, Vyjayantimala and features four bond girl-like a ...

Larry Lawton Lawrence Robert Lawton (born October 3, 1961) is an American ex-convict, author, paralegal, motivational speaker, and YouTuber. Lawton gained notoriety for committing a string of jewelry store robberies along the Atlantic Seaboard prior to hi ...

, although in a different context to mean it is best to rob cash as you don't have to sell it to a

fence A fence is a structure that encloses an area, typically outdoors, and is usually constructed from posts that are connected by boards, wire, rails or netting. A fence differs from a wall in not having a solid foundation along its whole length. ...

, potentially making the criminal process riskier. This phrase appears on his

merchandise Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customers to purchase more i ...

References

{{reflist

External links

Cash is King Again
– Motley Fool article describing the advantages of having cash available to invest.

Corporate finance Working capital management Cash