What Is Cash Is King?
"Cash is king" is a slang term reflecting the belief that money (cash) is more valuable than any other form of investment tools, such as stocks or bonds. This phrase is often used when prices in the securities market are high, and investors decide to save their cash for when prices are cheaper.
It can also refer to the balance sheet or cash flow of a business; a lot of cash on hand is normally a positive sign, while strong cash flows allow a company more flexibility in regards to business decisions and potential investments.
A third use of the phrase can refer simply to a form of payment. Many businesses only accept cash as a form of payment, as opposed to credit cards or checks, hence the phrase "cash is king."
Key Takeaways
- "Cash is king" is a phrase that refers to the superiority of cash over other assets or forms of payment.
- Investors use a "cash is king" strategy when securities prices in the market are high and opt to save cash for when prices become cheaper.
- As a form of investment, it is important to not let cash sit idle but rather to invest so that returns are at least equal to inflation.
- "Cash is king" also refers to when companies have large cash balances on their balance sheets allowing them more flexibility in managing their business and their obligations.
- When businesses only accept payment in cash as opposed to credit cards or checks, the phrase "cash is king" is commonly used.
Understanding Cash Is King
In the world of investments, investors who favor the "cash is king" phrase may opt to buy short-term debt instruments or certificates of deposit (CDs) versus buying high-priced securities. If employing a strategy of holding a lot of cash, an investor should work with a financial planner to estimate future cash needs and rates of inflation.
Cash, cash equivalents, and some short-term debt instruments lose spending power over time if they do not offer a return that keeps up with the rate of inflation. This can cause holders of cash as a long-term investment to experience a negative return over time.
For example, a dollar today is worth more than a dollar tomorrow, due to the time value of money. It is wisest to invest cash to where there is a return equal to or above inflation, instead of leaving it sitting idle.
Many businesses prefer payment in cash as it reduces the time of being paid from a credit card company, reduces the risk of bad credit, and allows for the immediate use of the cash.
"Cash is king" also refers to the ability of a corporation or a business to have enough cash on hand to cover short-term operations, buy assets, such as equipment and machinery, or acquire other facilities. More businesses fail for lack of cash flow than for lack of profit.
A significant level of cash also allows businesses to weather economic downturns when people are in savings mode and demand for a business's products or service may be low or non-existent. The higher the level of cash, the easier a business will be able to pay its operating expenses and debt obligations even if revenues are low.
Real World Examples
In recent years, since the global financial crisis, tech companies such as Apple (AAPL) and Amazon (AMZN) have been hoarding cash on their balance sheets as opposed to spending it. In 2017, market disruptor Amazon made an extremely large cash outlay to purchase Whole Foods, sending panic through the grocery industry and putting the stock of companies such as Kroger into a temporary tailspin. Cash gave Amazon the power to make that large purchase and disrupt the markets.
Apple is also known for having a large amount of cash. At the end of Q3 2022, Apple had $179 billion in cash, which is a staggering number. With that amount of cash the company can pretty much do anything; purchase a variety of businesses, invest in , expand stores, and stay afloat without any issue during economic downturns. However, given the demand for Apple products, it is unlikely it would see a significant drop in demand for its products even during a downturn.
FAQs
"Cash is king" is a colloquial phrase sometimes used in analyzing businesses or investment portfolios. It may refer to the importance of cash flow in the overall fiscal health of a business.
What does the slang cash is king mean? ›
"Cash is king" is a phrase that refers to the superiority of cash over other assets or forms of payment. Investors use a "cash is king" strategy when securities prices in the market are high and opt to save cash for when prices become cheaper.
What does the term cash is king mean? ›
It was popularised after the stock market crash of 1987 by the CEO of Volvo. Overall, the saying “cash is king” highlights the importance of having cash or liquid assets available to use when needed. It emphasizes the value of financial flexibility and the ability to respond to unexpected challenges or opportunities.
What is the meaning of King money? ›
Because of how precious cash can be during times of financial stress, many have said that cash is king. The phrase means that having liquid funds available can be vital because of the flexibility it provides during a crisis.
Do you agree that cash is king in business? ›
For businesses, cash is king because it allows them to hold on to valuable assets, sell some that may be strategic but smaller in scale, and make strategic acquisitions when the time is right.
What does "king" mean in slang? ›
Sometimes “friend,” “buddy,” “pal” or “bro” doesn't suffice. “King” is a word that goes a step further than others in proclaiming your love and appreciation. It's like: I see you out there. You're doing your thing, and we may not agree on the best song off Frank Ocean's “Blonde,” but you are a king.
Where does the term "cash is king" come from? ›
The origin of "cash is king" is unclear. The phrase became popularized following the global stock market crash of 1987 by Pehr G. Gyllenhammar, then CEO of Swedish car group Volvo.
Why is cash still king? ›
Cash fulfils all the needs outlined above as it is what is known as a bearer negotiable instrument: it belongs to the person who holds it. Unlike money which is transferred through electronic transfers, it is difficult to ascertain the source of cash and impossible to know the intended beneficiary.
Is cash King anymore? ›
Cash, long the king for payments, is falling off its throne as consumers worldwide gravitate to the convenience, ease and safety of digital payments. We are steadily progressing towards becoming a cashless society.
Why is cash not king? ›
“While temporarily worthwhile, holding cash tends to be less rewarding than a diversified portfolio.” Source: Carmignac, Bloomberg, Diversified portfolio consists of 60% S&P 500 and 40% US 10 Year Treasury bond in Total Return terms. Cash is a 3 month treasury instrument.
We find also qesiTah, rendered by Septuagint "lambs," probably referring to money in a particular form; chalkos, is used for money in Matthew 10:9; Mark 6:8; 12:41. It was the name of a small coin of Agrippa II (Madden, Coins of the Jews); chrema, "price," is rendered money in. 1.
What is the queen if cash is king? ›
To use a chess analogy, the new era Treasurer sits in a prime position to maximize their cash and working capital strategies. Cash is akin to the king on a chess board, the most important piece, demanding protection. Working capital, like the queen, is the most powerful, flexible, and strategic tool on the board.
What is the slang for thousand money? ›
The word grand is used in US and UK slang to mean a thousand dollars or a thousand pounds. There are several theories where this term came from, including the possibility that it refers to $1,000 being a grand (“large”) sum of money.
Is cash King in a depression? ›
Ultimately, cash was king during the Great Depression. Investors who held on to their money instead of putting it in risky stocks or bonds had the best chance of coming ahead.
Is cash king in 2024? ›
February 2024 | For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long.
Why is cash so important? ›
Cash allows you to keep closer control of your spending, for example by preventing you from overspending. It's fast. Banknotes and coins settle a payment instantly. It's secure.
What is the full quote of cash is king? ›
Turnover is vanity, profit is sanity, but cash is king for your business.
Is cash still king? ›
Cash is still king of some things
Economics experts say that despite increasing reliance on cards, cash remains resilient and an important payment method for many consumers.
