Chapter 3 – CASH AND CASH EQUIVALENTS

1. Company XYZ has the following assets at the end of the fiscal year:
- Cash in hand: $10,000
- Cash in savings account: $25,000
- Treasury bills maturing in 3 months: $15,000
- Marketable securities: $20,000

Calculate the total cash and cash equivalents for Company XYZ.

2. At the beginning of the month, a company had $50,000 in cash and cash equivalents. During the
month, the following transactions occurred:
- Cash sales: $20,000
- Purchase of inventory: $15,000
- Sale of equipment for cash: $10,000
- Investment in treasury bills: $30,000

Calculate the ending cash and cash equivalents for the company at the end of the month.

3. Company ABC has $80,000 in cash and $20,000 in marketable securities. Its current liabilities amount
to $60,000. Calculate the cash ratio for Company ABC.

4. A company's average accounts receivable is $50,000, average inventory is $30,000, and average
accounts payable is $20,000. The company's average daily sales are $5,000. Calculate the cash
conversion cycle for the company.

5. A company's accounts receivable at the beginning of the year were $100,000. During the year, it
made credit sales totaling $500,000. At the end of the year, $450,000 of accounts receivable were
collected. Calculate the net impact on the company's cash flow due to accounts receivable collection.

6. Which of the following assets would typically be considered as cash equivalents?

a) 90-day Certificate of Deposit
b) Commercial paper with a maturity of 120 days
c) Treasury bills with a maturity of 6 months
d) Corporate bonds with a maturity of 3 years

7. A company purchases inventory worth $50,000 on credit terms. How does this transaction affect the
company's cash flow statement?

8. Discuss two strategies that a company can employ to effectively manage its cash and cash
equivalents.

9. Given the following information, calculate the operating cash flow:

- Net income: $100,000
 - Depreciation expense: $20,000
- Increase in accounts receivable: $10,000
- Decrease in accounts payable: $5,000
- Amortization expense: $8,000

10. Company XYZ has $200,000 in cash and cash equivalents. Its average monthly operating expenses
are $50,000. Determine if the company's cash reserve is adequate to cover three months of operating
expenses.