“Over the past 30 years, the ratio of cash to assets has risen in the United States from 7 percent in 1980 to about 16 percent today. This shift is consistent with the rise in companies that spend a lot of money on research and development (R&D). As R&D expense is a fixed or quasi-fixed cost, this trend reflects the efforts by executives to manage overall risk by using a cash buffer to dampen the impact of operating leverage.”
A few notes I took after reading Michael Mauboussin’s Base Rate book
Stefan Cheplick

In essence, this is the equivalent of a manufacturer of widgets having an on hand inventory of widgets that they’ve made, so as to buffer against manufacturing lines going down, worker strikes or seasonal peaks of demand for their product.

It should be noted, that this buffer inventory has been eschewed for more intimate “on time” planning of manufacturing output and insight of demand awareness. Typically this works well, but when it fails, it FAILS.