Question
How much cash does the firm actually have? You are the CFO of ABC Corp. You are looking to hire a financial analyst, and youve
How much cash does the firm actually have?
You are the CFO of ABC Corp. You are looking to hire a financial analyst, and youve given an assignment to two short-listed candidates. Youve given the following information to the job applicants:
The company reported net sales of $6,250 million. Assume that there were no noncash sales. | |
Operating costs (excluding depreciation and amortization) were 65% of the companys total revenues. | |
Depreciation and amortization charges were 5% of total sales. | |
Interest charges were 15% of earnings before interest and taxes (EBIT) with a tax rate of 40%. |
Youve asked the candidates to give you a number that best represents the cash flow situation of the company.
Kurt submits a report stating that the firm has $1,269 million in cash available.
Jake submits a report stating that the firm has $956.25 million in cash.
Based on the information given to them, which applicant has provided a better estimate of the companys current cash flows? Check all that apply.
Kurt
Jake
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