For our discussion, consider that a company has reported a cash balance of $4.5

Question

For our discussion, consider that a company has reported a cash balance of $4.5 million on their balance sheet. Sounds like a lot of money, right? Consider what you have learned in chapter 14 - Financial Statement Analysis (Managerial Accounting 6th ed, Kieso K Weygandt) and address the following two questions:

1) What else do we need to know that helps us understand if this amount of money is enough or not enough and normal or not normal for this company.

2) What kinds of ratios can be compared that would include cash balances?

Explanation / Answer

Actually , we cant open link you have provided to read books.But as per my opinion:

a)whether the company has enough cash or not depends on the future expansion paln of the company.to day working capital requirement of the company.

Also it depends of day to day working capital requirement of the company.

b)The company can use liquidity ratio to determine cash balances .That is current ratio and quick ratio .

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