Explore BrainMass


Cash is the most liquid asset. It is the standard medium of exchange for business transactions (except in bartering transactions). As well, since cash is currency, it is the basis for measuring and accounting for all business transactions and the related items that appear on the financial statements of a business. 

Cash: Cash consists of currency on hand and demand deposits at banks or other institutions and are available for the business's immediate use. Negotiable instruments such as money orders, certified cheques, cashier's cheques, personal cheques and bank drafts are also usually considered to be cash. 

Cash Equivalents: Cash equivalents are "short-term, highly liquid investments that are both (a) readily convertible to known amounts of cash, and (b) so near their maturity date that they present insignificant risk of changes in value because of changes in interest rates" (FAS ASC 305-10-20). That is, cash equivalents are items that can be converted into cash quickly, but with some restrictuion or penalties. Cash equivalents typically include money-market funds, certificates of deposits (CDs), similar types of deposits, and short-term paper. Generally, only investments with original maturity of less than three months are considered to be cash equivalents, and investments in the equity of another firm can never be considered a cash equivalent. 

Cash in Foreign Currencies: Cash in foreign currencies is converted into their U.S. dollar amount at teh exchange rate on the date of the balance sheet. If there are restrictions on the transfer of funds out of a foreign country, this cash will be listed as restricted. If the restrictions are so severe, foreign currency may not qualify for recognition as an asset. 

Restricted Cash: restricted cash is cash on hand that cannot be used by the firm. For example, cash that has been pledged as security or collateral for a liability is considered restricted if the firm would violate the credit agreement by using the cash. The foreign currency case above serves as another example. 

Bank Overdrafts: Bank overdrafts occur when cheques are written for more than the amount of cash that the business had in their bank account. Bank overdrafts are current liabilities. If material, bank overdrafts should be reported as a seperate item. If not material, a bank overdraft can be aggregated with other accounts payable.  


Accounting Series Release No. 148, “Amendments to Regulations S-X and Related Interpretations and Guidelines Regarding the Disclosure of Compensating Balances and Short-Term Borrowing Arrangements"

Categories within Cash

Petty Cash

Postings: 5

Standards that govern the accounting techniques for petty cash are not specifically laid out in U.S. GAAP, but have been developed in accordance with GAAP by practicing accountants in different industries.

Credit Card Sales

Postings: 8

This section looks at issues for accounting for credit card sales transactions.

Cash Controls

Postings: 11

Cash is the asset that is most likely to be stolen or used improperly in business. As a result, 
cash control issues are some of the predominate issues related to internal controls.

Bank Reconciliation

Postings: 28

A bank reconciliation is a schedule that explains any differences between the bank's and the companys records of cash.

Calculating Present Values and Multiple Cash Flows

1. Calculating Present Values: For each of the following compute the present value. Answer in Excel. Present Value____Years____Interest Rate____Future Value ?_______________6__________7%_________$13,827 ?_______________9__________15__________$43,852 ?_______________19_________11__________$725,380 ?_______________23____

Net Working Capital and Operating Cash Flow

The 2009 balance sheet of Maria's Tennis Shop, Inc., showed $3.1 million in long-term debt, $877,400 in the common stock account, and $6.87 million in the additional paid-in surplus account. The 2010 balance sheet showed $3.6 million, $906,300, and $6.99 million in the same three accounts, respectively. The 2010 income statement

Incremental Operating Cash Inflows

Having a difficult time figuring out incremental operating cash inflows for finance class. I figured out step A in assignment but Part B with Incremental Operating Cash Inflows has me lost. If someone could show me how the first problem concerning the new grinder in my excel is calculated I would than be able to figure the rest

Cash Cycles: Audi

With Audi's manufacturing company's most recent quarterly income statement and balance sheet determine its Cash Cycle. EOQ: Lilly's Manufacturing needs fastener supplies to manufacture its products. The CFO estimates that the company will need about 200,000 cases next year. The cost of storing cases is about $0.90. The order

Expected Cash Flow After Debt Service

An owner is planning to retire after the coming year. She has to repay a loan $50,000 plus 8 percent interest and must rely on cash flow from operations to do so. Cash flow from operation is uncertain; there is a 70% probability it will equal $65,000, and a 30% probability it will equal $45,000. Assuming a tax rate of 0%, what i

Creating a spread sheet for one year's cash flow

Fluffy Bunnies makes cuddly toys for sale in the USA. All costs and income is in dollars. The company makes 2,000 toys for sale in each month and sells them all for cash payments (no credit sales). Each bunny sells for $6.25 including VAT. Variable costs per item are $3.50 including VAT. Variable costs are paid as they are in

Case Study questions on cash flow of several companies

See attached document for case study data needed for the two questions below: b) Comment on the data reviewed for each firm. Need to see at least 4 points on each company. c) Do any of these firms appear to have a cash flow problem? Comment. You may not see any troubles that warrant alarm, but you still should choose a com

Preferred Stock and Cash Discounts

Question 1: Your firm, People's Consulting Group, has been asked to consult on a potentially preferred stock offering by Brave New World. This 15% preferred stock issue would be sold at its par value of $35 per share. Flotation costs would total $3 per share. Calculate Brave New World's cost of preferred stock. Question 2: In

Pay Cash for an Asset

Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of retained earnings, the company would be able to pay cash to buy an asset with a cost of $200,000. Cash $50,000 Accounts payable $100,000 Inventory $200,000 Accruals $100,000 Accounts receivable $250,000 Total CL $200,000

Unequal cash flows affect the future value of an investment

How do unequal cash flows affect the future value of an investment? Please explain in detail. Please support answer with a minimum of three quality academic and/or industry references. Examples of acceptable references include: The Financial Times The Economist The Wall Street Journal Businessweek Reuters

Annual Operating Cash Flow

Answer the following two scenarios: Scenario One: A 5-year project is expected to generate revenues of $94800, variable costs of $35200, and fixed costs of $14600. The annual depreciation is $5000 and the tax rate is 33 percent. What is the annual operating cash flow? Answer $18,075 $32,980 $19,700 $31,800 $3

P&G: Net USD cash flow amount; cost of acquiring one US dollar

P&G is a US based MNC and has operations in Turkey. P&G expects 120,000,000 TRL cash flows in 6 months, however due to significant volatility, cash flows are expected to fluctuate as much as 20%. In other words P&G can get TRL120m, TRL96m or TRL144m depending on the economic conditions. Based on their expectations, P&G treasurer

Huntington Industries Cash Flows: Sunk Cost or Opportunity Cost

Huntington Industries is developing the relevant cash flows associated with the proposed replacement of an existing machine tool with a new, technologically advanced one. Given the following costs related to the proposed project, explain whether each would be treated as a sunk cost or an opportunity cost in developing the releva

Calculating cash flow: XYZ Company

The balance sheet and income statement for XYZ Company are presented along with some additional information about the accounts. Answer the following questions concerning cash flows for the period. a All accounts receivable and accounts payable are related to trade merchandise. Accounts payable are recorded net a

c7 p9

Elmdale Enterprises is deciding whether to expand its production facilities. Although long term cash flows are difficult to estimate, management has projected the following cash flows for the first two year ( in millions of dollars):

Cash-to-cash cycle for McGhee Corporation

Use the information below to answer the following questions. 1. Convert the asset portion of the firms balance sheet into its daily equivalent. How many days does the firm have in its asset "cash -to-cash" cycle? How can the firm make the number of days less? 2. Convert the short tem liabilities on the balance sheet int

Determining Relevant Cash Flows Time Line

For each of the following projects, determine the relevant cash flows, classify the cash flow pattern, and depict the cash flows on a time line. a. A project that requires an initial investment of $120,000 and will generate annual operating cash inflows of $25,000 for the next 18 years. In each of the 18 years, maintenance of

Cash flows, present value, cash flow streams, investments

1) Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value 18 percent? At 24 percent? Year Cash Flow 1 $950 2 $1040 3

Stock Price, Cash Flow, Opportunity Cost of Capital

1. An analyst knows with certainty that Skipper Inc. will exist for two years and have the following cash flows per share: Year 1 Year 2 Revenue $100 $100 Costs $ 80 $80 Net cash flow $ 20 $ 20 What is the stock price of Skipper Inc. if the opportunity cost of capital is 8 percent?

Calculating Net Credit Position

Sampson Orange Juice Company normally takes 20 days to pay for its average daily credit purchases of $6,000. Its average daily sales are $7,000, and it collects accounts in 28 days. a. What is the net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former. Acco

Present value of cash returns

The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $500,000 per year for the next five years and then $300,000 per year for 3 years after that (the chase returns occur at the end of each year). At 9% interest rate, what is

Lessee Analysis

From the lessee viewpoint, the riskiness of the cash flows, with the possible exception of the residual value, is about the same as the riskiness of the lessee's Answer a. equity cash flows b. capital budgeting project cash flows c. debt cash flows d. pension fund cash flows e. sales

Golden Basket Lottery choice of prize: house or cash. Draw a time line

You have just won the Golden Basket lottery which gives you the choice of your prize being either a house and land package with a current market value of $500,000 or receiving cash totalling $600,000 paid in three instalments of $200,000, $150,000, $250,000 respectively. If you choose the cash alternative the first of amount wil

Kohlberg - Catering Company Cash Flow Problems

Lawrence Kohlberg theorized that there are 6 stages of moral development through which a person may pass as he or she develops from infancy to adulthood. Kohlberg was interested in the way that people arrived at their moral judgment when faced with social dilemmas. In this question, you will assume that a small catering comp

Cash Cycles for Amazon

Please see the attached PDF diagram for these questions: 1.) Contrast Amazon's cash cycle to that of its competitor Barnes & Noble. Why does Amazon have such an advantage over Barnes & Noble ? What does this suggest as a sales model to other retailers ? 2a.) How can Boeing have such a long payables period of 208 days ?