Understanding the Opportunity Cost of Cash Reserves: How Companies Can Aim for Better Returns
Cash reserves are a cornerstone of corporate financial health, providing liquidity for operational needs, mitigating risks, and funding strategic opportunities. However, holding excessive cash on the balance sheet can lead to significant opportunity costs. In a climate where inflation remains a concern and interest rates fluctuate, idle cash can erode in value and diminish a company’s financial potential.
This article explores the concept of opportunity cost for corporations, looking into how businesses can optimise their cash reserves through strategic investment options such as structured products, peer-to-peer (P2P) lending, and high-yield cash management strategies.