Trading Below Cash

Written By
Paul Tracy
Updated November 4, 2020

What is Trading Below Cash?

A company's stock "trades below cash" if its market capitalization is less than the difference between its cash holdings and its liabilities.

How Does Trading Below Cash Work?

Trading below cash can be illustrated by a company which holds $1m in cash reserves, has $500k in outstanding liabilities, and has a total market capitalization equal to $400k. Its cash reserves less its liabilities are equal to $500k ($1m - $500k = $500k), while the total value of its stock is only $400k.

Why Does Trading Below Cash Matter?

A company with stock trades below cash is, generally, financially healthy, but not using its capital resources in an effective manner. In other words, cash holdings do not add value in the same way as the extrinsic value of the investments it may be used to purchase. 

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Trading Below Cash.
Be the first to ask a question

If you have a question about Trading Below Cash, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Trading Below Cash, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Trading Below Cash

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms