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Accounting Analysis for Chieftain International, Inc.

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Chieftain International, Inc. is an oil and natural gas exploration and production company. A recent balance sheet reported $208 million in assets with only $4.6 million in liabilities, all short-term accounts payable. During the year, Chieftain expanded its holdings of oil and natural gas rights, drilled 37 new wells, and invested in expensive 3-D seismic technology. The company generated $19 million cash from operating activities and paid no dividends. It had a cash balance of $102 million at the end of the year.

Please help by discussing the advantages and disadvantages of Chieftain having no long-term debt and such a large cash balance at the end of the year.

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The solution calculates the accounting analysis for Chieftain International Inc.

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The absence of a long term debt means that the company has virtually no interest rate charges. Also, the risks assumed by the firm's stockholders are minimized ...

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