Ever wonder about the advantages and disadvantages of companies carrying a lot of cash on their balance sheets?

Companies with piles of cash have a lot of flexibility to act quickly when various opportunities arise. But many successful companies choose to manage down their cash balances to nearly zero. They use the money to buy back shares and acquire other companies, among other things. If they suddenly need some cash, they draw on lines of credit available to them.

You might be surprised at just how much cash some companies have on hand. As of Sept. 30, 2006, Microsoft (NASDAQ:MSFT) had more than $9 billion in cash in its coffers, plus some $22.8 billion in short-term investments that could fairly quickly be converted to cash. It could probably buy some small countries with that. Fellow giant Wal-Mart (NYSE:WMT), meanwhile, had about $5.9 billion in cash and cash equivalents as of Oct. 31, 2006, while Time Warner (NYSE:TWX) had just $1.2 billion as of Sept. 30, 2006.

Different companies manage their cash in different ways, with varying degrees of success. It's not necessarily bad for a company to have a lot or a little cash, but if it has taken on a lot of debt, it had better be able to make those interest payments. And if a company has piles of cash, it had better be putting them to some effective use -- otherwise, as some have argued in the case of Microsoft, it may make sense to use some of the pile to buy back shares (if they're valued attractively) or issue a cash dividend to shareholders.

Microsoft and Wal-Mart are Motley Fool Inside Value recommendations, while Time Warner is a Motley Fool Stock Advisor recommendation. You can always try any of our newsletters for free with no obligation to buy.

Longtime Fool contributor Selena Maranjian owns shares of Microsoft, Wal-Mart and Time Warner. The Fool has a disclosure policy.