But some experts say measures like cost of capital are too narrow. "CFOs talk about the trade-off between optimizing the cost of capital and maintaining financial flexibility," says Gregory Milano, chief executive of Fortuna Advisors. "Most companies spend too much time optimizing cost of capital — because it's easier to quantify."

It makes just as much sense to examine cash from an operating-risk perspective. Katy Murray, CFO of talent management software firm Taleo, says she thinks about what she calls "the nuclear event": "If collections were to stop, how much cash would I need to cover operations in the next quarter and a half?" That's 6 weeks longer than the traditional rule of thumb, 12 weeks.

Other benchmarks, depending on the industry, include 2% of revenue, 6 months of fixed costs, or 12 months of research and development. If the company has debt, measures of debt-service coverage also need to be factored in. Comparing a company's cash holdings with others in its industry is also a key gauge. "In IT, where there is rapid change, volatility, and consolidation, it's difficult to define what too much cash is," says David Goulden, CFO of EMC.

The good news for CFOs holding on to liquidity is that there is evidence challenging the conventional wisdom that large cash balances depress valuations. Research by Fortuna shows that the top-quartile companies holding the largest amounts of cash as a percentage of assets actually traded at a premium in almost every quarter, dating back to 2003.

Of course, companies that don't have a lot of cash are often the ones with loads of debt and below-investment-grade credit ratings. But the results suggest that while investors may carp about cash-laden balance sheets, they behave otherwise. — V.R.

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