Corporate Financial Accounting
Corporate Financial Accounting
15th Edition
ISBN: 9781337398169
Author: Carl Warren, Jeff Jones
Publisher: Cengage Learning
Question
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Chapter 7, Problem 7.5MAD

(a)

To determine

To compare: The size of companies

(b)

To determine

Days’ cash on hand: This is a financial metric which measures number of days a company would pay its cash operating expenses, if revenue declines. Days’ cash on hand of 50 days or greater is considered to be ideal.

Formula to compute days’ cash on hand:

Days’ cash on hand = Cash and short-term investmentsDaily cash operating expenses 

To compute: Days’ cash on hand for Incorporation N, Incorporation LA, and Incorporation UA

(c)

To determine

To comment: On the cash sufficiency for the three companies

(d)

To determine

To identify: The company with greatest cash liquidity

(e)

To determine

To analyze: The reason for using ratios to compare the cash sufficiency, rather the cash balances

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Chapter 7 Solutions

Corporate Financial Accounting

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