Why Do U.S. Corporation Borrow when already Flush with Cash?on February 21st, 2011 at 12:14 pm
Why would U.S. companies with large cash surpluses find it necessary to borrow for investment and hiring? For example, the Wall Street Journal reports that Microsoft has $40 billion in cash and short-term securities while carrying $2.25 billion in unsecured debt. The reason may be that, if the cash surpluses are held offshore, the taxes on bringing that cash back to the U.S. may exceed the cost of raising cash in the U.S. through borrowing. Cash brought back to the U.S. may be subject to tax equal to the difference between the tax paid abroad and the higher U.S. corporate tax rate. How many large corporations’ balance sheets are showing both large cash surpluses and unsecured debt?
Why Investors Can’t Get More Cash Out of U.S. Companies (2/19/11) (subscription required)