Firms have more cash, keeping it in conservative investments

When it comes to cash flow, companies seem to have been able to give themselves a little breathing room.

Almost half of employers reported having greater cash balances during the first quarter of 2012 than they did during the first quarter of 2011.

That’s according to the 2012 AFP Liquidity Survey by the Association for Financial Professionals (AFP). And fewer than 30% of firms reported having less cash and short-term investment balances during this period.

So how did firms bolster their cash flow? Sixty-one of the employers in the study have more cash on hand because they generated higher operating cash flow and 22% were able to bolster cash flow by accessing debt markets.

Of the firms that reported lower cash balances, 30% said it was because they ramped up capital expenditures — and a quarter said it was because they repaid or retired their debt.

Despite the increased access to cash, most firms are choosing to play it safe in terms of how they invest it. The study found that 74% of corporate cash balances are now being held in one of three traditional investment vehicles — bank deposits, money market funds and U.S. Treasure securities — with 51% being in bank deposits.