Adequate cash levels are fundamental towards smooth operations of firms. Managers have a tendency to hold a
significant share of firms’ assets as liquid assets in order to reinvest on other physical assets, payments to
stockholders and to keep cash inside the firm. Cash levels are influenced by firms´ capital structure, cash flow,
investments and asset management policies as well as by theirs working capital requirements, and dividend
payments. This paper focuses on analyzing the drivers of cash holdings of non-financial Portuguese
manufacturing small and medium sized companies (SMEs), for the period 2001 to 2007. Results show that firm
size, growth opportunity, relationship with banks, cash flow uncertainty, debt structure, liquidity and leverage
have a significant influence on the level of cash holdings of non-financial SMEs in Portugal.