Amazon.com, Inc. (AMZN) is one of the largest Internetretailers in the world. Netflix, Inc. (NFLX) provides digitalstreaming and DVD rentals in the United States. Amazon andNetflix compete in streaming and digital services; however,Amazon also sells many other products online. The cash,temporary investments, operating expenses, and depreciationexpense from recent financial statements were reported as followsfor both companies (in millions):Amazon NetflixBalance sheet, end of year:Cash$19,334 $1,468Short-term investments6,647266Income statement:Operating expenses131,8018,451Depreciation expense8,1164,925a. Determine the days' cash on hand for Amazon and Netflix.Round all calculations to one decimal place.AmazonNetflixDays' Cash on Handdaysdaysb. With regard to the cash on hand which of these statements iscorrect?1. Netflix appears to have greater cash liquidity to support itsoperations.2. Amazon appears to have greater cash liquidity to support itsoperations.3. There is no significant difference in the days' cash on handbetween the two companies.4. Greater cash liquidity means the business is highlyprofitable.

Cash on hand in the broad sense means all the cash as well as coins available on hand and also the securities which are marketable securities which can be converted into cash very easily in other words includes the liquid assets also. Cash on hand in days’ means for how many days the given cash can pay the expenses of the company which are the operating expenses.Depreciation is a non-cash expenses as this cost does not make the outflow of the cash from the business. Computation of days’ cash on hand of Amazon Days' cash on hand = Cash + Short-term investmentsOperating Expenses - Depreciation Expenses365 DaysDays' cash on hand = $19,334 + $6,647$131,801 - $8,116365Days' cash on hand = $25,981$123,685365Days' cash on hand = $25,981$338.863013698Days' cash on hand = 76.6710999718Days' cash on hand = 76.7 Days Computation of days’ cash on hand of Netflix Days' cash on hand = Cash + Short-term investmentsOperating Expenses - Depreciation Expenses365 DaysDays' cash on hand = $1,468 + $266$8,451 - $4,925365Days' cash on hand = $1,734$3,526365Days' cash on hand = $1,734$9.6602739726Days' cash on hand = 179.498014747Days' cash on hand = 179.5 Days a) Amazon Netflix Days’ Cash on Hand 76.7 179.5 B) The correct option is 1 Explanation: As the Netflix is having 179.5 days cash on hand and Amazon is having only 76.7 days cash on hand. It means that Netflix is having greater cash liquidity to support its operations because it can pay the expenses up till the 179.5 days from the cash available.

Business

Accounting

a. Determine the days' cash on hand for Amazon and Netflix. Round all calculations to one decimal place. Amazon Netflix Days' Cash on Hand days days b. With regard to the cash on hand which of these statements is correct?

a. Determine the days' cash on hand for Amazon and Netflix. Round all calculations to one decimal place. Amazon Netflix Days' Cash on Hand days days b. With regard to the cash on hand which of these statements is correct?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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