UK Accounting Glossary
In business, a war chest is a stash of money set aside to deal with unexpected changes in the business environment. The term originates with the medieval practice of having a chest, literally, filled with money to open in time of war.
Companies rarely have a war chest anymore, relying instead on quickly raised debt which costs nothing to carry when you don’t need it. This is not always a reasonable substitute, as the debt available to a company typically drops as a result of the same actions that require the war chest to be opened.
A war chest contains funds that are set aside and used to deal with unexpected changes in an environment. The war chest may be used to fund a war, a political campaign or a business. Typically, “war chest” is used to refer to the latter. A corporation may set aside cash (the war chest) in anticipation of events such as an acquisition, hostile takeover or market consolidation. The money in the war chest has been earmarked for such occasions. “War chest” is a slang term that originated from the medieval practice of literally filling a chest with money, only to open in it a time of war. The reserve of cash in the war chest is, therefore, a precaution and form of protection – it is a method of preparation for difficult times ahead.
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This glossary post was last updated: 5th February 2020.