Answer:
The cash position of a company changes on a relatively frequent basis. During the beginning stages of an economic downturn it may be desirable to hold a larger cash position in case credit markets dry up, as was the case during much of 2008 and 2009. However, when a firm has considerable prospects to deploy cash in an investment, whether it be an investment in property, plant, equipment, acquisitions or some other project, holding cash represents an opportunity cost. The cost to the firm is the advantages and benefits the firm would recognize had they chosen to deploy the cash into one of the previously mentioned investment vehicles. While holding cash reduces risk it also misses the rewards that other investments may have provided.