Rated US companies have bolstered their liquidity positions, increasing cash ratios in the second quarter of the year.

The median measure of cash and equivalents as a share of total liabilities of companies rated higher than BBB- by S&P Global Ratings rose to 20.4%, up from 19.6% in the first quarter. The ratio measures a company's ability to pay its short-term debt using cash and cash equivalents and is a closely watched gauge of liquidity.

The quarterly increase was the third in a row for investment-grade companies, according to the latest S&P Global Market Intelligence data.

The cash ratio measures the ability of companies to cover the short-term obligations on their debt using cash and cash equivalents. The median ratio for companies covered by Ratings had been steadily declining since the second quarter of 2020 when companies undertook a dash for cash to bolster balance sheets during a global pandemic.

Lower-rated companies have also improved their liquidity positions. The median cash ratio of non-investment-grade companies rose to 39.5% in the second quarter, up from 35.4%.

Sector breakdown

The median increases in cash ratios for investment grade companies occurred in seven of the 11 sectors with particularly strong gains in the materials sector — to 29.5% from 21.4% in the first quarter — and communication services — to 27.7% from 22.9%. By contrast, the median ratio for companies rated BBB- and higher declined in both the financials and energy sectors.

There were also strong increases in the median ratios in the non-investment-grade component of several sectors. The information technology sector recorded an increase to 62.2% from 57.6% while utilities jumped to 23.9% from 15.1%.