Minicase 2 Chieftain International, Inc.}
Chieftain International, Inc., is an oil and natural gas exploration and production company. The company's 1994 balance sheet reported \(\$ 208\) million in assets with only \(\$ 4.6\) million in liabilities, all of which were short-term accounts payable.
During the year, Chieftain expanded its holdings of oil and gas rights, drilled 37 new wells, and invested in expensive 3-D seismic technology. The company generated \(\$ 19\) million cash from operating activities in 1994 and paid no dividends. It had a cash balance of \(\$ 102\) million at the end of the year.

\section*{Instructions}

(a) Name at least two advantages to Chieftain from having no long-term debt. Can you think of disadvantages?

(b) What are some of the advantages to Chieftain from having this large a cash balance? What is a disadvantage?

(c) Why do you suppose Chieftain has the \(\$ 4.6\) million balance in accounts payable, since it appears that it could have made all its purchases for cash?