Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 1RQ
Summary Introduction
To discuss: The reason why company A has more cash than company D
Expert Solution & Answer
Explanation of Solution
Company A may thought of holding an unusually huge cash value in expectation of an acquisition opportunity. Furthermore, the cash may be used as a precaution for future happenings when it needs the cash and when they are unable to raise in some situation. Thus, company A holds more cash.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Apple’s cash pile had reached $137 billion in December 2012. Major shareholders, such as David Einhorn of Greenlight Capital, began to demand that Apple return some of its cash to its shareholders. Why might Apple have needed to hold on to so much cash in excess of what it needed to operate? Would you have recommended that Apple respond to and satisfy shareholders’ demands by distributing significant amounts of its cash? If so, what method(s) of returning cash would you have recommended, and why
(Related to Checkpoint 4.1) (Liquidity analysis) Airspot Motors, Inc. has $2,499,800 in current assets and $862,000 in current liabilities. The company's managers
want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below
2.2 (assuming all other current assets and current liabilities remain constant)?
Airspot Motors, Inc. could add up to $ in inventories. (Round to the nearest dollar.)
What is the new current ratio?
Chapter 17 Solutions
Foundations Of Finance
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - What are the two major objectives of the firms...Ch. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 1SPCh. 17 - Prob. 2SPCh. 17 - Prob. 3SPCh. 17 - (Interest rate risk) Two years ago your corporate...Ch. 17 - Prob. 6SPCh. 17 - Prob. 7SPCh. 17 - Prob. 8SPCh. 17 - Prob. 9SPCh. 17 - Prob. 10SPCh. 17 - Prob. 11SPCh. 17 - Prob. 1MCCh. 17 - Prob. 2MCCh. 17 - Prob. 3MCCh. 17 - Prob. 4MC
Knowledge Booster
Similar questions
- HouseholdCo, a large household products firm, recently reported $6.2 billion in accrued and other liabilities and $49.0 billion in revenues, such that accrued and other liabilities equaled 12.6 percent of revenues. Using data from the annual report's footnote 4 provided below, discuss why a forecast ratio of 12.6 percent going forward would distort your forecast of free cash flow. How should the balance sheet be reorganized to prevent this? Note 4-Supplemental financial information Selected components of current and noncurrent liabilities were as follows: $ million Accrued and other liabilities-current Year 1 2,833.0 Marketing and promotion Compensation expenses Accrued ShaveCo exit costs 1,846.0 456.0 Taxes payable 922.0 Other 102.0 Total 6,159.0arrow_forwardAn analyst has collected the following information regarding National Co.:Earnings before interest and taxes (EBIT) = P730 million.Earnings before interest, taxes, depreciation and amortization (EBITDA) = P850 million.Interest expense = P100 million.The corporate tax rate is 25 percent.Depreciation is the company’s only non-cash expense or revenue.What is the company’s net cash flow?arrow_forward(Liquidity Analysis) The King Carpet Company has $3,190,000 in cash and a total of $12,490,000 in current assets. The firm's current liabilities equal $5,020,000 such that the firm's current ratio equals 2.5. The company's managers want to reduce the firm's cash holdings down to $1,090,000 by paying $566,000 in cash to expand the firm's truck fleet and using $1,534,000 in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio? The new current ratio is (Round to one decimal place.)arrow_forward
- During the last year, Lucky Corp. generated $702 million in cash flow from operating activities and had negative cash flow generated from investing activities (-$384 million). At the end of the first year, Lucky Corp. had $120 million in cash on its balance sheet, and the firm had $280 million in cash at the end of the second year. What was the firm's cash flow (CF) due to financing activities in the second year? A. $197.50 million B. $118.50 million C. -$79.00 million D. -$158.00 millionarrow_forwardAwkward Inc. currently has $2,145,000 in current assets and $858 in current liabilities. The company's managers want to increase the firm inventory, which will be financed by short-term note with the bank. What level of inventories can the firm carry without its current ratio falling below 2.0?arrow_forwardH5. Solve both question with proper step by step calculationarrow_forward
- 10. Of Peterson Enterprises’ $1.4 billion in assets, $150 million of those assets are in cash or can be readily converted to cash. Other companies in Peterson Enterprises' industry have cash as a percentage of total assets of around 8%. This is an example of Group of answer choices high liquidity. low liquidity. high solvency. low profitability high activity low solvency.arrow_forward(Liquidity Analysis) The King Carpet Company has $3,150.000 in cash and a total of $12,480,000 in curent assets. The firm's current liabilities equal 56,670,000 such that the firm's current ratio equals 1.9. The company's managers want to reduce the firm's cash holdings down to $1,040,000 by paying $556,000 in cash to expand the fem's truck feet and using $1,554,000 in cash to retre a short-term note if they carry this plan through, what will happen to the firm's current ratio? The new current ratio is (Round to one decimal place) -CHED-arrow_forwardGoldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets and $1 million in current liabilities. The firm currently pays out 75 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in chars)? $187,900 $299,900 $328,800 $364,100arrow_forward
- You are the financial controller of Pack West (Pty) Ltd. Your company is experiencing difficulties with their cash flows owing to the Covid-19 uncertainty. At the end of April 2022, you noticed that the total sales of the company keep decreasing while the total cost are relatively stable, and you are worried that the company will not have sufficient funds to pay the salaries of R50 000 for April.You have the following historical information at your disposal:Total sales were R125 000 in January, R115 000 in February, and R110 000 and R95 000 for March and April, respectively. Historical information shows that 70% of the total sales are for cash and the debtors pay as follows:50% of the total debt one month after the sale, 30% in the following month and 20% in the third month after the sale.The total purchases for January were R100 000, R110 000 in February, and R100 000 and R105 000 for March and April, respectively. 30% of the total purchases are paid in cash and the rest of the…arrow_forwardIn 2021, Johnson Controls reported the following accounting items (in millions of dollars): Sales = $50 Cash Expenses = $30 Depreciation = $51 Interest Paid = $3T axes = $1 Dividends Paid = $3 Capital Expenditures = $8 What were the firm's Free Cash Flows in 2021? (Note: Enter your answer without the millions or the dollar sign, so if you think the answer is $5 million, just enter 5)arrow_forwardThe assets of Dallas & Associates consist entirely of current assets and netplant and equipment, and the firm has no excess cash. The firm has total assets of $2.5 millionand net plant and equipment equals $2 million. It has notes payable of $150,000, longtermdebt of $750,000, and total common equity of $1.5 million. The firm does have accountspayable and accruals on its balance sheet. The firm only finances with debt and commonequity, so it has no preferred stock on its balance sheet.a. What is the company’s total debt?b. What is the amount of total liabilities and equity that appears on the firm’s balance sheet?c. What is the balance of current assets on the firm’s balance sheet?d. What is the balance of current liabilities on the firm’s balance sheet?e. What is the amount of accounts payable and accruals on its balance sheet? (Hint:Consider this as a single line item on the firm’s balance sheet.)f. What is the firm’s net working capital?g. What is the firm’s net operating…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT