Many balance sheets will soon be out of balance

London

THE lesson that too much debt is dangerous has sunk in. But for many companies, the corollary proposition, that too little cash is a killer, seemingly hasn't. If there's one thing investors ought to remember heading into the eighth year since the financial crisis, it's that without healthy cashflows, balance sheets won't stay balanced for long.

Trading house Glencore is a prime example. As commodity prices continued to plunge in 2015, its net debt of around US$30 billion, which investors had previously tolerated, started to look scary. The shares went into free-fall. As cashflows dwindled, so did the amount of debt inv…