Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 15, Problem 4TIF
To determine
Identify how the company stays under the circumstance of running negative cash flow, and also explain whether investing in Incorporation G is a good investment.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are considering an investment in a new start-up company, Giraffe Inc., an Internet service provider. A review of the company’s financial statements reveals a negative retained earnings. In addition, it appears as though the company has been running a negative cash flow from operating activities since the company’s inception.How is the company staying in business under these circumstances? Could this be a good investment?
Discuss and explain the difference between profit/loss and cash flow. How could a company have positive cash flow, but show a net loss at year end? What are some examples of industries and/or companies that might generate subtantial cash flow, but could lose money? Conversely, what are some examples of industries and/or companies that might generate very limited cash flow, but could show a profit at year end?
Assume you are the financial officer of a major firm. The president of the firm has just stated that she wishes to reduce the firm's investment in current assets since those assets provide little, if any, return to the firm. How would you respond to this statement?
2. As long as a firm maintains a positive cash balance, why is it essential to review the firm's cash flows?
Chapter 15 Solutions
Managerial Accounting
Ch. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Fully depreciated equipment costing 50,000 was...Ch. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - Prob. 1BECh. 15 - Prob. 2BECh. 15 - Prob. 3BECh. 15 - Prob. 4BECh. 15 - Land transactions on the statement of cash flows...Ch. 15 - Prob. 6BECh. 15 - Prob. 7BECh. 15 - Prob. 8BECh. 15 - Prob. 9BECh. 15 - Prob. 1ECh. 15 - Effect of transactions on cash flows State the...Ch. 15 - Prob. 3ECh. 15 - Prob. 4ECh. 15 - Cash flows from operating activitiesindirect...Ch. 15 - Prob. 6ECh. 15 - Prob. 7ECh. 15 - Reporting changes in equipment on statement of...Ch. 15 - Reporting changes in equipment on statement of...Ch. 15 - Prob. 10ECh. 15 - Prob. 11ECh. 15 - Prob. 12ECh. 15 - Prob. 13ECh. 15 - Prob. 14ECh. 15 - Prob. 15ECh. 15 - Prob. 16ECh. 15 - Statement of cash flowsindirect method The...Ch. 15 - Prob. 18ECh. 15 - Prob. 19ECh. 15 - Prob. 20ECh. 15 - Prob. 21ECh. 15 - Prob. 22ECh. 15 - Prob. 1PACh. 15 - Statement of cash flowsindirect method The...Ch. 15 - Prob. 3PACh. 15 - Prob. 4PACh. 15 - Statement of cash flowsdirect method applied to PR...Ch. 15 - Prob. 1PBCh. 15 - Prob. 2PBCh. 15 - Prob. 3PBCh. 15 - Statement of cash flowsdirect method The...Ch. 15 - Statement of cash flowsdirect method applied to PR...Ch. 15 - Prob. 1MADCh. 15 - Prob. 2MADCh. 15 - Prob. 3MADCh. 15 - Prob. 4MADCh. 15 - Prob. 5MADCh. 15 - Prob. 1TIFCh. 15 - Financial condition Tidewater Inc., a retailer,...Ch. 15 - Prob. 4TIF
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your companys year, in retrospect, as well as your vision for the companys future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?arrow_forwardWhich of the following statements is FALSE?i. Using the payback rule, you can calculate how much profits are earned over the investment period.ii. The IRR is sensitive to the timing of the cash flows.iii. Shareholders have the first claim on the cash flows of the company.arrow_forwardplease answer all the question. 1. Identify two important variables to be considered when making an investment decision. 2. What must a company do in the long run to be able to provide a return to investors and creditors? 3. What is the primary objective of financial accounting? 4. Define net operating cash flows. Briefly explain why periodic net operating cash flows may not be a good indicator of future operating cash flows. 5. What is meant by GAAP? why should all companies follow GAAP in reporting to external users? 6. Explain the roles of the SEC and the FASB in the sitting of accounting standards.arrow_forward
- Why is cash generated from operations usually larger than net profit? A business commentator made the following remark during a discussion of the financial performance of a large, but struggling, company: These accountants spend lots of money to create complicated financial statements, especially income statements, which use what they call ‘accrual’ accounting. Then they take away all the accruals and supposedly return us to the cash profit number (‘cash flow from operations’) we would have had anyway, if they hadn’t bothered with accrual accounting in the first place! Why don’t they just give us the cash profit and leave it at that? If you were an accountant involved in the discussion, and everyone turned to you to hear your response to the commentator, what would you say?arrow_forwardWhy can it be misleading to use a firm's working capital to discuss cash flow without further qualification? "Cash flow methodology should distinguish between a new capital-intensive business and a more mature operation." Discuss. The number of companies acquired only two or three years from startup has increased dramatically in the last few years. What are the root causes of these early exits? How much is a customer worth? How much does it cost to acquire an additional one? This is the focus of Peters' plan for a successful early exit when the business model is yet to show any profit. However, investors will also have to consider other factors. Which factors are not covered in Peters' analysis?arrow_forwardaa As consultants in advisory services at an accounting firm, we are hired by management of Gadberry to advise on cash flow reporting. Management is concerned about the relatively small net increase in cash, and how the company is doing compared to competitors Nessly and Tootsey. The following Tableau Dashboard will assist in our analysis.arrow_forward
- Can a company have a high net income but not enough cash to pay its bills? Explain your response. Give me one scenario or example to support your response.arrow_forwardIs it possible for a company to show positive cash flows and still be in grave trouble?arrow_forward1. How is it possible for a firm to be profitable and still go bankrupt? Select one: a. The firm has positive net income but has failed to generate cash from operations. b. Earnings have increased more rapidly than sales. c. Sales have not improved even though credit policies have been eased. d. Net income has been adjusted for inflation. 2. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders? Select one: a. Gross profit margin and net profit margin. b. Return on investment and return on equity. c. Total asset turnover and operating profit margin. d. Return on investment. 3. What is the first step in an analysis of financial statements? Select one: a. Specify the objectives of the analysis. b. Do a common size analysis. c. Check references containing financial information. d. Check the auditor’s report. 4. What information does the auditor’s report contain? Select one: a. The results of…arrow_forward
- Choose from the drop down list the stage of the corporate life cycle the company described is experiencing: introductory/growth, maturity or decline. Assume the company being described follows a typical life cycle, a. The company is not generating positive cash from its operating activities. The company's cash flow from investing activities is negative as expenditures are being made for property, plant and equipment. Introductory/ Growth Decline Maturity C. The company has started to declare and pay dividends. d. The company's cash from operating activities and investing activities has begun to decline. e. Cash from investing activities is positive and the company is selling off excess assets. The company is experiencing positive cash flows from all three sources of cash: operating, investing and financing activities. f. 8. The company's cash from financing activities is negative. b.arrow_forwardHow would the SCF indicate to an investor that the company is experiencing a "cash crunch?"arrow_forwardInvestors and creditors look to the income statement to see whether a company Group of answer choices A. is paying sufficient dividends to owners. B. owns enough assets to pay its debts. C. has a positive cash flow from operations. D. is profitable.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License