What is your definition of cash-rich?

What is your definition of cash-rich?

What is the meaning of Cash-rich? According to a Google search which I did, it gives several examples such as  (1) having a large amount of money available to spend (2) cash-rich companies are rushing to build their portfolios.

Well, are you confused? I won't be surprised if you are because yours truly also struggled to come out to term with the more truly definition of cash-rich meaning.

When I first came to know this word Cash-rich in my younger days (when I was beginning to learn English), my first impression was that it is something like someone loaded with spare cash (whatever amount in hand) and free to spend as he wishes without the worry of any debts to pay.

Well, it seems like I am not exactly right if my definition of cash-rich is like what I thought as mentioned above.

A recent article of Focus Malaysia weekly featured a story of cash-rich companies in Malaysia. My initial thoughts were that those mentioned companies are cash-rich companies sitting on hoards of cash with no debts or all or small debts to pay.

How wrong I was when I scrolled down and discovered that many of those mentioned cash-rich companies actually carry long-term large debts (many of their debts are several times more than their cash in hand).

Sorry, I might be very wrong or naive about this definition, but can we truly classified these types of companies carrying larger debts than their current cash in hand as cash-rich?

Let us take a few examples to share. Oriental Holdings has cash RM 2.2 billion while its total debt is RM 1.3 billion. Definitely Oriental Holdings is truly cash rich if assuming it pays off its debt and will still has RM 900 million.

But on the other hand, another company Bumi Armada has cash RM 2.1 billion, but its debts are as high as RM 9.8 billion. Truly its financial position is not as comfortable as Oriental Holdings.

Of course, I am only sharing my views from the cash position and I did not use its available assets or its business to take into consideration. We should also take note that there are many companies carrying bigger debts than its cash in hand holding on to several unrealised assets like land or its valuable cash generating business.

Anyway, I am here to express my thoughts on this cash-rich words. A random survey with a few of my elderly friends about the true meaning of cash-rich held similar views as mine. Most of them have this same perception that cash-rich definition is one who has spare cash in hand without a single debt or minor debts.

Take another interest example of a person instead of a company. Assuming a 50 year old man has cash RM 100,000.00 + another RM100,000.00 in his EPF account, he will be holding a total of RM200,00.00. But he still has another RM300,000.00 housing loan to settle. His current property is worth RM500,000.00 at market value. Can we consider him as cash-rich or not?

But if we take into account into his overall financial statement including his house's (asset) market value of RM 500,000.00, then he should be in a positive position of RM 400,000.00 (House = RM 500,000.00 + RM 100,000.00 cash in hand + RM 100,000.00 EPF = RM 700,000.00 minus RM 300,000.00 - Housing Loan = RM 400,00.00).

But this is taken into account his house is being sold for RM 500,000.00. Then again, one is unlikely to sell his property because he needs to stay and besides, if he sells off his property, where is he going to stay? Do you think he will buy another similar property at similar price again?

Back to most of us, I think the most wonderful definition of cash-rich for an individual person would be having a few hundreds thousand or a one or two millions in hands (let us not talk about the super rich) and virtually no housing / children's education / car loans to pay at all.

I think there are not many of the average Joe who can claim to be in this wonderful cash-rich position. If you are one of these rather semi elite group, definitely you are considered truly cash-rich in my eyes.

Congratulations if you are one of these elite group reading this blog now. Give yourself a pat for having well done in your career or business. It is not easy to achieve even to be in this semi elite status.

But then again, while feeling cash-rich is a wonderful feeling, there is another ........-rich position that is even more important than having plenty of money.

Do you know what is it? By now, if you still can't figure out the word, then check with all those very sick or unhealthy people and ask which they would choose if God gives them a second chance with this question : Would you choose "health-rich" or "cash-rich"?