(1) Additional large company which is currently accumulating a cash hoard. Next, evaluate how the company identified in your research can use the cash flow statement to project efficient uses of the cash hoard it has accumulated.

CASH HOARD

Toyota

The company “Toyota”, automobile manufacturers is consider among the top companies that have accumulated a lot of money in the hoarding of a growing cash reserve. Toyota nears $40B cash reserve as calls grow for new investment, payouts. Some think Toyota (and Toyoda) should be doing something,  anything with that big stack of cash. “Capital efficiency is not improving as fast as the fundamental improvement of Toyota. As the Toyota is manufacturing company, Toyota reserves money in excess to aid in the times of cyclical downturns Large companies choose to hoard cash and increase their cash to assets ratio to avoid long-term borrowing and debts Such companies reduce their risk exposures in an economy where the government has reduced interest rates making the company attractive to investors Companies, by hoarding cash anticipate being in a position to meet its financial obligations. The company currently plans to pay 30 percent of its net income as dividends, up from 20 percent during its last fiscal year

Suggest at least two (2) advantages and two (2) disadvantages of companies accumulating cash hoards.

We can highlight following two . advantages of companies accumulating cash hoards as under,

(1)

cash hoarding is reflecting the company with strong business performance in the market .It means that the company  strategy  has been working  as  planned and the product offered  has  acquired  excellent  demand  by  consumers.

(2)  second advantage is that it cash hoard itcan be used as a buffer against bad times or mistimed acquisitions.  In situation of the poor economic time or an acquisition didn’t go the way it was planned, the company who has buffer stock of cash or cash hoarding will have sufficient money to recover or maintain while planning new strategies.

We can highlight following two . advantages of companies accumulating cash hoards as under,

(1)

The main disadvantages of Cash Hoarding is negative impact on ‘expected share price’ performance as investors claim companies were defined as ‘cash hoarders’ that had over 15% of their ‘total assets’ in cash and cash equivalents on average over the last 10 years.Such type of companies unable to deliver a higher rate of return by deploying excess cash– must return cash to shareholders and not squander it

(2)

The second disadvantage Cash Hoarding are a Dearth of attractive investment opportunities. If the company is not attracted to invest in another company, equipment or new system, it will be holding the cash and the company will be using the same old equipment. The company might be afraid of expanding