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Can someone help It would be greatly appreciated?
Recently Boeing has maintained a cash balance of over $10 billion. At an annual inflation rate of about 2 percent, does cash have more or less purchasing power at the end of a given year than at the beginning? By how much? Is such a gain or loss reflected on the company’s financial statements? Why or why not? Why would Boeing want to keep its cash balance as low as possible? Why doesn’t the company reduce its cash balance to zero?
3 Antworten
- vor 6 Jahren
Inflation is an increase in the price of goods so cash will have less purchasing power at the end of the year. Under normal accounting methodologies there would be no specific mention in the financial statements. 2% is a fairly low rate so it doesn't result in the financial statements being too inaccurate - if circumstances were different and inflation was very high (and I'm sure there would be much debate about the actual rate required) then there might well be a different approach e.g. adjusting balance sheet figures or revaluing assets.
As to the level of cash balance... it would not be wise to reduce it to zero because at least some cash or liquid assets are needed to run the business - paying for day to day expenses etc... but there is also little point in keeping vast amounts of it around because it isn't very productive. It doesn't make more cash on its own, small amounts of interest notwithstanding - so the consensus is usually to keep as little as you need to. What that amount actually is will likely vary depending on the type of business you are, what the forecasted need for cash is, and what the alternatives are - in terms of investments or other assets that would give a better return.
- vor 5 Jahren
There are no past lives. There is no God. There is no jesus. Just a book of power hungry exaggerated lies we call the bible. 11:11 has no significance to anything you think you may have experienced in another life. It is a random numerical number you see in sequence on a digital clock to tell you what time it is. And 11:11 is supposed to mean good luck anyway. Dont know why so serious :)
- ?Lv 7vor 6 Jahren
Cash increases or decreases based on inflation. The $10 billion is not held in cash, just easily converted investments.