Disclosure Analysis: Cash, Cash Equivalents, Receivables, and Inventories
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Task: Select a publicly held company to use as the basis for this assignment. Use the internet to acquire a copy of your selected company's most recent financial statements. Prepare a response in which you analyze the disclosures contained within the financial statements related to cash and cash equivalents, receivables, and inventories. Include a list identifying the components of the organization's cash and cash equivalents.
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Solution Summary
The solution selects a publicly held company and analyze3s this company's cash, cash equivalents, receivables and inventories.
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1. Analyze the disclosures contained within the financial statement related to cash and cash equivalents, receivables, and inventories.
Some companies disclose cash as a separate account because they want to give proper disclosure of their assets. The cash account on the balance sheet should include coin and currency on hand, deposits in checking and savings accounts, and near-cash assets such as un-deposited checks. The cash and cash equivalents include the above cash and liquid investments.
The distinction between cash and cash equivalents is determined based on the duration of the investment. To be classified as cash, an asset must be readily available for use by the business; i.e., its use should not be restricted. The money market account and the certificates of deposit are not considered readily available and should be classified as investments as they take some time to liquidate. Thus it should be classified separately to reveal the true picture of the organization.
I am using the financial ...
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