What Changed?
Corporate America looks liquid on the surface. A recent analysis of Russell 1000 companies shows cash balances around $2.1 trillion, yet the cash-to-enterprise-value ratio has slipped to just 3.4% as market caps and balance-sheet leverage move higher.
At the same time, companies are still producing hefty free cash flow in dollar terms, but they’re working harder to do it. Operating cash flow is rising, capital spending is growing even faster, and the cash conversion cycle has lengthened noticeably. The Federal Reserve’s financial accounts show that nonfinancial corporates now hold liquid assets roughly equal to their short-term liabilities—about 93% as of Q2 2025—underscoring that buffers remain elevated even as those buffers are being used more intensively.
Meanwhile, S&P 500 earnings for Q3 2025 are still growing at a double-digit pace, with more than four in five companies beating EPS estimates, suggesting profitability is holding up even as the cash engine gets more complex.
It's a secret project … bigger than Tesla … bigger than SpaceX … and bigger than Twitter.Inside this warehouse in Memphis Tennessee…
Lies a new technology that is 100,000 times more powerful than Nvidia’s most advanced AI chip.
Nvidia’s CEO is even considering investing in this project directly.
Get the full details on Elon’s secret new AI project now.
The Numbers
Russell 1000 companies hold about $2.1 trillion in cash, but their cash/EV ratio has fallen to 3.4%, down as valuations and debt loads have climbed.
In the latest quarter, these firms generated roughly $1.6 trillion in free cash flow, yet the FCF yield slipped to about 2.8%, reflecting a larger market-value denominator.
Operating cash flow rose to around $2.7 trillion, up 13.3% year-over-year, while capex jumped 15.9% to approximately $1.1 trillion—cash is being reinvested faster than it’s growing.
Total shareholder payouts in the Russell 1000 reached about $1.9 trillion (roughly $770 billion in dividends and $1.1 trillion in net buybacks), meaning most free cash is still being returned, not retained.
The cash conversion cycle stretched to 87 days—up 16 days quarter-on-quarter and six days year-on-year—signaling more cash tied up in inventory and receivables.
Nonfinancial corporates’ liquid assets equaled about 92.7% of short-term liabilities in Q2 2025, within a roughly 90–96% band over the past year, confirming that on-balance-sheet liquidity remains structurally high.
For Q3 2025, S&P 500 blended earnings growth is about 13% year-over-year, with revenue growth near 8% and 82% of companies beating EPS estimates—strong P&L performance even as cash dynamics shift.
Why It Matters
The picture that emerges is not a classic “cash crunch” story—it’s a quality of liquidity story. Cash balances are big and still growing, but more of each incremental dollar is being pulled into capex and working capital just to sustain revenue and keep pace with competition. That’s what you’d expect in a world of higher input costs, AI-driven infrastructure races, and more capital-intensive business models.
For equity investors, the key shift is from “how much cash is on the balance sheet?” to “how efficiently is that cash being refreshed?” Falling FCF yields and longer cash conversion cycles mean the same pile of cash supports less optionality—less room for aggressive buybacks, opportunistic M&A, or cushion against a downturn—unless earnings and operating cash flow keep accelerating.
For credit investors, elevated liquid assets relative to short-term liabilities are comforting, but rising capex and slightly higher leverage in many sectors suggest greater refinancing and interest-rate sensitivity if growth slows. Firms that depend on sustained high investment just to defend their franchise are more exposed if revenue growth normalizes.
The signal to watch is the spread between earnings growth—which is still robust—and the trajectory of free cash flow yield and cash conversion. If that gap widens further, the “liquidity mirage” becomes more real: healthy income statements masking a gradually tightening cash system underneath.
Takeaway
Corporate America doesn’t have a cash problem in absolute terms; it has an efficiency problem at the margin. The comforting headline—trillions in cash and strong earnings—can hide the fact that it now takes more capital, more working-capital days, and lower FCF yields to sustain that picture. For investors, the real edge lies in owning the companies where free cash flow is compounding faster than the cash demands of growth, not just the ones with the biggest balances.
— Lauren Brown
Editor, American Ledger
Sources
Investing.com, November 2025
https://www.investing.com/news/stock-market-news/analysis-what-are-us-companies-doing-with-cash-4377619
FactSet, November 2025
https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_110725A.pdf
Federal Reserve, “Financial Accounts of the United States (Z.1), Second Quarter 2025,” September 2025 https://www.federalreserve.gov/releases/z1/20250911/z1.pdf
St. Louis Fed (FRED), September 2025 https://fred.stlouisfed.org/series/BOGZ1FL104001006Q