How much cash does the firm actually have? You are the CFO of ABC Corp. You are
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How much cash does the firm actually have?
You are the CFO of ABC Corp. You are looking to hire a financial analyst, and you’ve given an assignment to two short-listed candidates. You’ve given the following information to the job applicants:
• | The company reported net sales of $1,875 million. Assume that there were no noncash sales. |
• | Operating costs (excluding depreciation and amortization) were 65% of the company’s total revenues. |
• | Depreciation and amortization charges were 5% of total sales. |
• | Interest charges were 15% of earnings before interest and taxes (EBIT) with a tax rate of 40%. |
You’ve asked the candidates to give you a number that best represents the cash flow situation of the company.
Finn submits a report stating that the firm has $381 million in cash available.
Arty submits a report stating that the firm has $286.875 million in cash.
Based on the information given to them, which applicant has provided a better estimate of the company’s current cash flows?
Related Book For
The Legal Environment of Business
ISBN: 978-0538473996
11th Edition
Authors: Roger E Meiners, Al H. Ringleb, Frances L. Edwards
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