Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)
10th Edition
ISBN: 9780135639344
Author: Arthur J. Keown, John D Martin, J. William Petty
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
(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?
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
6,159.0
Chapter 17 Solutions
Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)
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
- An 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_forwardIn the Chart1. What percentage of 2000's disposable income is invested? 2. How much should be invested if you have $4,000 in cash? If a corporation holds $40 billion in bonds, $10 billion in preferred stock, and $20 billion in common stock... A. How much capital is it worth? B. How much would it theoretically take to manage it? C. Practically, how much would it take to control it?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
- 2. Does the company have enough cash and liquidity to survive an economic slowdown? Enhance the answer with a clear conclusion Ans. The financials of WeWork doesn't seem to be much profitable, we can assume that is because of the pandemic. In the year 2022, the revenue of the first quarter was $765 million which is an increase of 6-7% in a quarter. Net loss was $504 million. Because of the increase in interest rates, it is hard for WeWork to get more loans to finish off its debt and the investors are not much interested as they can interpret the future outcomes by looking at the current balances of the company. The revenue in the third quarter was $817 million which is an increase of 24% year-over-year. The company has $500 million in undrawn debt commitments from SoftBank and has said it expects to end 2022 with $300 million in cash, less than one-third of what it had at the end of 2021. Its debt contracts allow it to borrow another $500 million. As the cash and liquidity of WeWork…arrow_forwardDuring 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_forward
- H5. Solve both question with proper step by step calculationarrow_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_forwardOn the news, LinkedIn's market capitalization increased to nearly $26 billion, while Microsoft's market capitalization actually dropped $10.6 billion. Explain the drop in Microsoft's market capitalization. What is going on?arrow_forward
- This is an example prioblem. I need help understanding the math that is being done?arrow_forwardIf you give me wrong answer, I will give you unhelpful ratearrow_forwardThe most recent banking crisis happened in March 2023, when three small and medium-sized banks in the U.S. failed. Among the banks that collapsed was Silicon Valley Bank (SVB). As reported in a Bloomberg Law article (Pollard, 2023), SVB was founded in 1983 and the bank had about US$209 billion in total assets and about US$175.4 billion in total deposits at the end of 2022. It is important to note that there are usually several factors (both internal and external) that can cause a firm to enter into administration, which are not related to the audit quality. In relation to SVB, Professor Ramasastry (2023) from the University of Washington provided insights into why SVB failed and why bank failures are difficult to predict (see references below for the link). However, in cases where the client company fails, Kadous (2000) finds that the auditor is more likely to be found "guilty" even when they provided higher-quality audits. This points to the expectation gap relating to audits of…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