The liquidity position and solvency are high. Day-to-day
operations can be run smoothly without any delays caused by
shortage of cash. For example, payments to suppliers can be made
without delay to ensure uninterrupted supply
Cash discounts can be availed with suppliers for early
payments
Short-term business opportunities can be exploited quickly
In case of unexpected adverse business environment, the cash
balance can help tide over the difficult times
The cons are :
Idle cash does not earn returns
It is a drag on profitability as the cash earns low
returns
Opportunity cost - The excess cash could be invested elsewhere
either by the firm or the shareholders
Leads to inefficiency in working capital management and cash
deployment