Alvarado Ltd., a private company, has reported increasing profit every year for the past five years. Alvarado
Question:
Alvarado Ltd., a private company, has reported increasing profit every year for the past five years. Alvarado would like to expand operations by adding three retail stores within the next three years, and is seeking a loan from its bank to help fund the expansion. In Alvarado's most recent statement of financial position (SFP), the company reported a positive cash balance and a healthy current ratio of 2. Alvarado's controller believes that a statement of cash flows “would not be useful to the bank manager in making their decision because Alvarado has a solid financial position and has had increasing profit every year for the past five years.” From the perspective of Alvarado's bank manager,
(a) Discuss the importance of positive cash flows,
(b) Discuss the purpose and usefulness of the statement of cash flows.
Step by Step Answer:
a A business should have positive cash flows to finance expansion pay dividends and remain solvent d...View the full answer
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
Students also viewed these Business questions
-
The income statement figures for the past five years for Phom Ltd are presented in the question. Prepare a trend analysis and a vertical analysis (using sales revenue as the base amount) and comment...
-
Stamford Corporation, a private company, has reported increasing profit every year for the past five years. Stamford would like to expand operations by adding three new retail stores within the next...
-
Company Inc's most recent Statement of Financial Position is given below. Company Inc. Statement of Financial Position As at Dec 31, 2021 Assets Cash 425,000$ Accounts Payable 300,000$ Accounts...
-
3) Sauseda Corporation has two operating divisions-an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the...
-
The apparatus shown here has two gas-filled containers and one empty container, all attached to a hollow horizontal tube. When the valves are opened and the gases are allowed to mix at constant...
-
For real estate developemnt company explain the different ways to collect the data (market research )? either Outsourced or in-house? and Why?
-
The probabilities that a quality control team will visit \(0,1,2,3\), or 4 production sites on a single day are 0.15,0.22,0.35,0.21, and 0.07. (a) Simulate the inspection team's visits on 30 days....
-
(a) Plot the above data on a graph. Do you observe any trend, cycles, or random variations? (b) Starting in year 4 and going to year 12, forecast demand using a 3-year moving average. Plot your...
-
Select information from BOINKE Corporation's financial statements is provided here. Balance Sheets as of December 31 Current Assets Net Plant and Equipment Total Assets Accounts Payable Notes Payable...
-
Flowmaster Forge Inc. is a designer and manufacturer of industrial air-handling equipment that is a wholly owned subsidiary of Howden Industrial Inc. Howden is interested in selling Flowmaster to an...
-
Access the financial statements of WestJet Airlines Limited for its year ended December 31, 2017, from SEDAR (www.sedar.com) or the company's website. Instructions Review the financial statements and...
-
As at December 31, 2020, Bajac Inc. has the following balances: cash in bank, $108,000; investment in preferred shares (retractable, purchased by Bajac within 90 days of maturity date), $120,000;...
-
What do you estimate the buyer should pay per unit for the next 700 pieces assuming the supplier demonstrates a 75 percent learning curve or improvement rate?
-
Besides Hall and Hofstede, both David Victor and Fons Trompenaars have identified a set of cultural dimensions that could be useful in information systems development. Using the Web, identify their...
-
Different views of plagiarism and collaborative learning were described as examples of differences among different cultures today. Using the Web, identify other differences that could affect the...
-
Compare and contrast reference documents, procedures manuals, and tutorials.
-
Pete is a project manager on a new systems development project. This project is Petes first experience as a project manager, and he has led his team successfully to the programming phase of the...
-
Macroeconomic policy in Europe Beware of simplistic answers to complicated macroeconomic questions. Consider each of the following statements and comment on whether there is another side to the...
-
Jonas Tech Corporation recently acquired Innovation Plus Company. The combined firm consists of three related businesses that will serve as reporting units. In connection with the acquisition, Jonas...
-
An environmentalist wants to determine if the median amount of potassium (mg/L) in rainwater in Lincoln County, Nebraska, is different from that in the rainwater in Clarendon County, South Carolina....
-
Trust Me Renovations Corp. (TMRC) was incorporated on January 1, 2018. At that time, it issued 100,000 ordinary shares; 10,000, $100, 4% preferred shares A; and 20,000, $100, 5% preferred shares B....
-
Wongs Lingerie Inc. (WLI) has been in business for over 10 years. As at January 1, 2018, its capital structure consisted of 200,000 ordinary shares; $500,000 of 4% non-cumulative preferred shares;...
-
The ordinary share transactions of Caltown Financing Inc. and net income for its latest three years are summarized below: Caltown does not have any preferred shares outstanding. Required: a....
-
You work in a fashion retail company. A new CEO has been assigned who is determined to grow the firm's customer base and product categories. Having recently undertaken a CRM course, you have been...
-
Recall an ethical dilemma that you encountered within the last year (preferably a work-related dilemma). If you cannot think of a work-related ethical dilemma, perhaps you had to make a difficult...
-
Once the team choses and perfects the plan, discuss how the team strategy you have identified and planned out is SMART : S pecific, M easurable, A ttainable, R ealistic, and T imely.
Study smarter with the SolutionInn App