Continuing Company Analysis-Amazon: Days\' cash on hand Amazon.com, Inc. is one

Question

Continuing Company Analysis-Amazon: Days' cash on hand Amazon.com, Inc. is one of the largest Internet retailers in the world. Netflix, Inc. provides digital streaming and DVD rentals in the United States. Amazon and Netflix compete in streaming and digital services; however, Amazon also sells many other products online. The cash, temporary investments, operating expenses, and depreciatic expense from recent financial statements were reported as follows for both companies (in millions): Amazon Netflix Balance sheet, end of year: Cash Temporary investments Income statement: Operating expenses Depreciation expense $14,557 $1,114 88,810 5,102 4,746 2,781 a. Determine the days' cash on hand for Amazon and Netflix. Round all calculations to one decimal place. Amazon Netflix Days' Cash on Hand days days b. With regard to the cash on hand which of these statements is correct? 1. Netflix appears to have greater cash liquidity to support its operations. 2. Amazon appears to have greater cash liquidity to support its operations. 3. There is no significant difference in the days' cash on hand between the two companies 4. Greater cash liquidity means the business is highly profitable

Explanation / Answer

days cash on hand = cash on hand / (operating expenses - non cash expenses)/ 365

note:

amazon days cash in hand = $14,557 / (88,810-4746)/365

=>$14,557 / 230.3

=>63.2 days....(to one decimal place)

net flix days cash in hand :

cash and cash equivalents = $1,114 + 495 =>$1,609.

now,

days cash in hand = $1,609 / (5102-2781) / 365

=>$1609 / 6.4

=>251.4 days.

b.1. Netflix appears to have greater cash liquidity to support its operations.

Amazon Netflix days' cash on hand 63.2 days 251.4 days

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