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Analyze Apache Corporation Apache Corporation (APA) is an independent energy company that explores, develops, and produces oil and gas products. Apache operates worldwide, including in the United States, Canada, and the North Sea. The profitability of the oil and gas business is highly influenced by the price of crude oil and natural gas, and by the success in finding oil and gas. Selected financial information for Apache for three recent years follows (in millions): a. Determine the days’ cash on hand for each year. Round all calculations to one decimal place. b. Interpret the results. c. What are some ways a company can respond to a liquidity squeeze?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 7, Problem 3MAD
Textbook Problem
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Analyze Apache Corporation

Apache Corporation (APA) is an independent energy company that explores, develops, and produces oil and gas products. Apache operates worldwide, including in the United States, Canada, and the North Sea. The profitability of the oil and gas business is highly influenced by the price of crude oil and natural gas, and by the success in finding oil and gas. Selected financial information for Apache for three recent years follows (in millions):

Chapter 7, Problem 3MAD, Analyze Apache Corporation Apache Corporation (APA) is an independent energy company that explores,

  1. a. Determine the days’ cash on hand for each year. Round all calculations to one decimal place.
  2. b. Interpret the results.
  3. c. What are some ways a company can respond to a liquidity squeeze?

a.

To determine

Compute the day’s cash on hand for each year (round all calculations to one decimal place).

Explanation of Solution

Day’s cash on hand: Day’ cash on hand refers to the cash and near cash balances available with a business organization to meet its daily operating expenses. The formula to calculate the day’s cash on hand is:

Days’ Cash on Hand =Cash + Short-Term Investments(Operating Expenses - Depreciation Expense) ÷ 365 Days

Compute the day’s cash on hand for year 1:

Days’ Cash on Hand =Cash and Short-Term Investments(Operating Expenses  Depreciation Expense) ÷ 365 Days$769($18,302$4,526) ÷ 365 days$769$37.7= 20.4 days (rounded to one decimal place)

The Day’s Cash on Hand for year 1 is 20.4 days

b.

To determine

Interpret the results.

c.

To determine

Identify the ways the company can respond to a liquidity squeeze.

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Financial And Managerial Accounting
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