IN TIMES OF A MARKET meltdown there is also inevitably a liquidity crunch. Many companies find that debts mount and revenues fall, drying up their reserves.

But it is also during these times that buying opportunities crop up at bargain prices. A company with a huge cash position would grab this oncein- a lifetime opportunity. Simply put, cash is king.

Having a strong cash pile enables companies to aggressively expand their market share, organically or via mergers and acquisitions by buying out weaker competitors.

And even though there is no guarantee that cash-rich companies would outperform the market or deliver positive total returns to shareholders, at least the chances of them going bust are lower.

In a plunging market like now, defensive companies with strong cash positions are also likely to do better, as investors flee to the safety of capital preservation of their investments.

The current bear market situation is likely to worsen before it recovers. The recent carnage on the world’s equity markets certainly shocked investors who were used to a long boom period.

Still, some say the warning signs were already evident some time back. Truth be said, the core of the problem – the deterioration of the United States housing market and its subsequent subprime problem – had surfaced way back in July 2007.