Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q26Q.

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 238

Short Answer

Sergey Co. has net cash provided by operating activities of $1,200,000. Its average current liabilities for the period are $1,000,000, and its average total liabilities are $1,500,000. Comment on the company’s liquidity and financial flexibility, given this information.

The business reflects a good position in terms of financial flexibility and liquidity.

See the step by step solution

Step by Step Solution

Definition of Financial Flexibility

The ability of the business entity to handle the financial pressure that might arise in different economic conditions is known as financial flexibility.

Liquidity of the Business

Conclusion: Current cash debt coverage is 1.20, which means that a business entity can cover all of its current liabilities using the cash generated from operations.

Financial Flexibility of the Business

Conclusion: Cash debt coverage is 0.80, reflecting that the business entity can cover at least 80% of its total liabilities using the cash generated from operations.

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.