Only one of the UK's largest companies has net cash on its balance sheet.
Last week we took a peek at The Top 20 UK Shares, seeing how they stacked up in terms of price earnings (P/E) multiples and dividend yield.
Useful as these simple metrics are, they are just one piece of the puzzle when it comes to determining whether any given share is good value or not. Another key metric all good Fools look at is a company's cash position. We need to see how well a share can weather the inevitable economic storms that it will face over its lifetime.
So let's review the same group of top UK shares to see how they fare:
Source: Bloomberg
This time around, we're ignoring banks. As their business is dealing with money, they don't have a net cash or net debt position that's comparable with other companies.
It's also worth bearing in mind that the above figures are taken from a database, and so may contain the odd error (it's always advisable to check the original data from the company concerned before making any investment decision). The net debt figures in the table should be for the company's last year end.
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A unique net cash situation
Let's give AstraZeneca a special mention, for being the only company on our list that can boast a net cash position (although BHP Billiton comes within a whisker, if you can call £200m a whisker).
I have to say, I was a little surprised by the scarcity of net cash. We often hear how cash flush big US companies are, such as Apple (NASDAQ: AAPL.US) and Microsoft (NASDAQ: MSFT.US), but their UK cousins don't seem to share this good habit.
I suspect much of the blame for this can be levelled at the City, where it's long been fashionable to think that companies should gear their balance sheets to become more 'operationally efficient'. I'm sure US companies face similar calls from Wall Street, but it would seem that common sense prevails.
As with most financial theories, when it comes to the real world, they are absolute tosh. True, some companies have steadier business models, and so can usually cope with a higher level of debt. But give me a staid, old-fashioned cash-rich company every time.
The most indebted
Imperial Tobacco wins this particular booby prize, with net debt of nearly half its market value. Vodafone isn't too far behind, a legacy of its past where huge acquisitions and multi-billion pound 3G licence bids were the order of the day.
The rest of our group doesn't look too heavily weighed down, although the debt situation at both Tesco and Diageo is worth watching. There are no other big retailers in our group to compare Tesco against, but Diageo has noticeably more debt than similar outfits, such as Unilever and Reckitt Benckiser.
And finally, despite the payouts that BP is having to make for the Gulf of Mexico disaster, it's not particularly overburdened by debt at the moment.
All in all, I'd give this group a C+. Not bad, but plenty of room for improvement. After all, the main purpose of a business is to generate cash for its shareholders.
More on the markets:
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> The Motley Fool owns shares in AstraZeneca, GlaxoSmithKline, Reckitt Benckiser and Tesco.
