In the balance sheet that you provided ahead of the meeting, Maddie noticed that ASD has a significant level of retained earnings and reserves. She

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In the balance sheet that you provided ahead of the meeting, Maddie noticed that ASD has a significant level of retained earnings and reserves. She has expressed concern that there may be idle cash in the business that could be better utilised. As a result, she has brought with her to the meeting a list of items she would like ASD to purchase to help the business meet its objectives. Maddie is confused when you advise her that despite the level of retained earnings, there is insufficient cash in the business to fund her proposed list of purchases. Explain to Maddie why the level of retained earnings in the business is not necessarily equivalent to the amount of cash available.

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