Chieftain International, Inc., is an oil and natural gas exploration and production company. A recent balance sheet

Question:

Chieftain International, Inc., is an oil and natural gas exploration and production company. A recent reported $208 million in assets with only $4.6 million in liabilities, all of which were short-term accounts payable.
During the year, Chieftain expanded its holdings of oil and gas rights, drilled 37 new wells, and invested in expensive 3-D seismic technology. The company generated $19 million cash from operating activities and paid no dividends. It had a cash balance of $102 million at the end of the year.

Instructions
(a) Name at least two advantages to Chieftain from having no long-term debt. Can you think of disadvantages?
(b) What are some of the advantages to Chieftain from having this large a cash balance? What is a disadvantage?
(c) Why do you suppose Chieftain has the $4.6 million balance in accounts payable, since it appears that it could have made all its purchases for cash?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...