Freeport-McMoRan (NYSE:FCX) is in a tough spot. It sells commodities and commodity prices have been weak. But compounding that issue is how much cash the company has been spending in the past couple of years, pulling its cash balance down and potentially putting the company's business at risk.

How much is in the bank?
At the end of the second quarter, Freeport had $466 million in cash on its balance sheet. For you and me, that would probably be a big number. But for a multinational commodity player, it's really not all that much. And, more to the point, that number was up only $2 million dollars through the first half of the year.

A Freeport gold facility. Source: Freeport-McMoRan.

If you took your paycheck at the beginning of a month and at the end of the month only ended up with a couple of bucks left, you'd be cutting it pretty close. Well, Freeport had revenues of $8.4 billion in the first six months of the year. So ending that span with just $2 million in cash looks like things are pretty close to hand-to-mouth right now.

But it gets worse if you look further back in time. For example, at the start of the decade Freeport's cash balance was roughly $2.6 billion. So it ended the second quarter with less than a fifth of that total. However that's not the full story. In 2010 and 2011 it added around $2.2 billion to its hoard, bringing the total to $4.8 billion in the bank at the start of 2012 -- a fact that makes $466 million look even more dismal. What happened?

It's basically been all downhill since, with a cash burn of $1.1 billion in 2012, $1.7 billion in 2013, and $1.5 billion last year -- which is what brings us to the lowly sum of $464 million to start 2015. To be fair, a lot of that cash was used to invest in the business. Though some of those investments, such as an ill-timed move into oil and gas drilling, seem suspect at this point.

But the cash did go somewhere, with the presumed goal of improving the business. And you can't forget that Freeport is a miner, and there's always a notable level of cash that needs to go toward maintaining its operations -- which really just highlights how important it is for a company like Freeport to be careful with its money.

This isn't new
All of that said, the commodity downturn isn't a new phenomenon. It's been with us for a little while now, since most commodity prices have been in a downtrend since 2011. And to its credit, Freeport has been working hard to cut costs along with every other commodity player for the past couple of years. In fact, some of the cash burn was for projects started at what in hindsight we now know was the wrong time. Once you start a big project, it can be hard to stop. As the first-half results show, however, the cost-cutting effort has started to show through on the cash generation side, if only in a very small way.

A Freeport onshore oil operation. Source: Freeport-McMoRan.

It's no wonder Freeport has been discussing strategic alternatives for some of its businesses, most notably the oil and gas assets, which are costly to operate, and selling new shares despite a depressed stock price. The company clearly knows cash is a problem and it's taking drastic measures to shore up its business and balance sheet.

A cover-up?
So what do you do with all of this information? Watch the cash flow statement and the balance sheet -- that's where the action is right now. The company could be at a turning point, or that $2 million cash bump in the first half could be a fluke. You'll want to know which one it is.

For example, if Freeport can't generate more cash, it will have increasing problems down the line with not-so-minor things like paying down debt (which is what the cash from the stock issue is partially earmarked for) while still maintaining its operations in tip-top shape. You'll also want to make sure that stock sales like the one the company just completed don't paper over the cash generation issue, since each new share sold simply dilutes current shareholders a little bit more. Sure, Freeport the company will end up in a better financial position, but that will come at the expense of shareholders.

At this point, Freeport looks like it's short on cash. That's pushing it to make some drastic moves. Watch this closely. It's unlikely that Freeport is going to go belly up because of its weak cash position, but that doesn't mean investors won't get hurt as it works to shore up its business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.