Companies Begin Tapping Into Pandemic Cash Reserves

Companies have begun dipping into the cash supplies they built up when the pandemic began, using that money for acquisitions, buybacks and buying inventory to deal with supply chain backlogs.

But as The Wall Street Journal (WSJ) reported Friday (July 15), this spending of cash reserves varies from industry to industry.

For example, a number of industrial companies have seen their cash ratios dip below pre-pandemic levels. The median cash ratio for investment-grade industrial firms was 21.4 in the first quarter, compared to 37.8 in 2021’s first quarter and 23.8 during same period in 2019, according to the report.

Industrial companies are struggling with the impact of the supply chain backlog and continued production delays, said Chris Dankert, senior vice president at investment firm Loop Capital Markets, in the report. Several companies are using cash to buy more inventory as they face extended lead times on orders.

“Right now, it’s all about working capital management on the industrial side of things,” Dankert said, per the report.

Meanwhile, companies in the healthcare world — including pharmaceutical, insurance and biotechnology firms — have also reduced their cash buffers to 2019 levels, the report stated.

Demand in the healthcare sector tends to stay steady, said Damien Conover, a director of healthcare equity research with financial firm Morningstar, according to the report. That means there is less need for companies to hold on to large cash reserves, and healthcare companies have spent the last year using their capital to fund acquisitions and pay for share buybacks.

PYMNTS reported this week that the emerging world of digital therapeutics is the next step for telemedicine, in which software and apps using consumer electronics like smartphones, tablets and virtual reality headsets can be ePrescribed, delivered and used by patients to treat digitally treat a range of illnesses.

Read more: Telemedicine’s Post-COVID Evolution Paves Way for Digital Therapies, Diagnostics 

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