Q: I've heard investors complain about Apple's massive stockpile of cash, and I've even heard Warren Buffett lament Berkshire Hathaway (BRK.B -0.85%) having too much cash. How could having over $100 billion in the bank be a bad thing? 

Having a massive amount of cash is a good problem to have. Cash gives companies financial flexibility, especially during tough times. Cash-rich companies rarely go bankrupt, no matter what the economy throws at them.  

Still, having an excessive amount of cash is a problem. Take Berkshire Hathaway's case. At the end of 2018, Berkshire had $112 billion in cash and equivalents on its balance sheet, and since it hasn't made any major acquisitions since the year ended, it's likely to be even higher now. 

This $112 billion, or roughly one-fifth of Berkshire's entire market cap, that is sitting around in bank accounts or short-term Treasury securities is earning little or no returns. If Berkshire can earn a 10% return on its invested capital and its cash is earning 2%, for example, this means that the company is missing out on 8% of $112 billion, or about $9 billion, in earnings per year.  

Investors would love to see Berkshire use its cash to acquire another company, invest in more stocks, or buy back large quantities of stock -- any of these would likely produce a better return than what the cash stockpile is generating now. 

To be clear, some cash is desirable. Warren Buffett insists on keeping at least $20 billion of Berkshire's assets in cash so the company will always be able to meet its financial obligations. However, having too much cash is using a substantial portion of a business's investable capital in an entirely unproductive way.