/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q3Q Question: A recent financial mag... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 5: Q3Q (page 237)

Question: A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?

Short Answer

Expert verified

Answer

Financial flexibility can be defined as meeting uncertainties by maintaining the amount and timing of cash flows. Financial flexibility reduces the risk associated with the business entity.

Step by step solution

01

Meaning of Financial Planner

A financial planner is an individual who helps a business entity or personal individual maintain its cash flow. Cash flow is maintained so the business entity can meet any unforeseen situation.

02

Financial Flexibility

Financial flexibility can be defined as the business entity's ability to maintain the time and amount of cash flow to meet the uncertainties.

03

Importance of financial flexibility

Financial flexibility is essential for the business entity because it lowers the risk to the business entity. It reduces the risk of failure of the business entity.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Ames Company reported 2017 net income of \(151,000. During 2017, accounts receivable increased by \)13,000 and accounts payable increased by \(9,500. Depreciation expense was \)44,000. Prepare the cash flows from operating activities section of the statement of cash flows.

The partner in charge of the Kappeler Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the cash flow statement for the year ended December 31, 2017. Because he must leave on an emergency, he asks you to finish the letter by explaining: (1) the disparity between net income and cash flow, (2) the importance of operating cash flow, (3) the renewable source(s) of cash flow, and (4) possible suggestions to improve the cash position.

Date

President Kappeler, CEO

Kappeler Corporation

125 Wall Street

Middleton, Kansas 67458

Dear Mr. Kappeler:

I have good news and bad news about the financial statements for the year ended December 31, 2017. The good news is that net income of $100,000 is close to what we predicted in the strategic plan last year, indicating strong performance this year. The bad news is that the cash balance is seriously low. Enclosed is the Statement of Cash Flows, which best illustrates how both of these situations occurred simultaneously . . .

Instructions

Complete the letter to the CEO, including the four components requested by your boss.

What are some of the techniques of disclosure for the balance sheet?

How does information from the balance sheet help users of the financial statements?

Case 4: Amazon.com The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon鈥檚 stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit. The following financial information is taken from a recent annual report.

(\( in millions)

Current year

Prior year

Current assets

\)31,327

$24,625

Total assets

54,505

40,159

Current liabilities

28,089

22,980

Total liabilities

43,764

30,413

Cash provided by operations

6,842

5,475

Capital expenditures

4,893

3,444

Dividend paid

0

0

Net income (loss)

(241)

274

Sales

88,988

74,452

Instructions

(a) Calculate free cash flow for Amazon for the current and prior years, and discuss its ability to finance expansion from internally generated cash. Thus far Amazon has avoided purchasing large warehouses. Instead, it has used those of others. It is possible, however, that in order to increase customer satisfaction, the company may have to build its own warehouses. If this happens, how might your impression of its ability to finance expansion change?

(b) Discuss any potential implications of the change in Amazon鈥檚 cash provided by operations from the prior year to the current year.
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Operational Management

Read Explanation

Human 91影视

Read Explanation

Family Business

Read Explanation

Finance Literacy (Business Studies)

Read Explanation

Managers

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.