Showing posts with label Surplus company funds. Show all posts
Showing posts with label Surplus company funds. Show all posts

Saturday 8 August 2009

Investment of Surplus Funds by Nonfinancial Businesses

The ordinary manufacturing or distributing business does not or should not have funds for permanent investment in securities.

For "temporary investment" - which may cover quite a number of years - the most suitable media are U.S. Government securities or tax-free issues.

It seems fairly evident, on the whole, that other types of investments by business enterprises - whether in bonds or in stocks - can offer a appreciably higher return only at risk of loss and of criticism.

A possible exception may be made in favour of well-protected preferred stocks or guaranteed common stocks, because of their attractive tax status when owned by a corporation.

Ref: Security Analysis by Graham and Dodd