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Analyze and compare Amazon.com to Netflix Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Netflix, Inc. (NFLX) provides digital streaming and DVD rentals in the United States. Amazon and Netflix compete in streaming and digital services; however, Amazon also sells many other products online. The cash, temporary investments, operating expenses, and depreciation expense from recent financial statements were reported as follows for both companies (in millions): Amazon Netflix Balance sheet end of year: Cash $ 19,334 $1,468 Short-term investments 6,647 266 Income statement Operating expenses 131,801 8,451 Depreciation expense 8,116 4,925 a. Determine the days’ cash on hand for Amazon and Netflix. Round all calculations to one decimal place. b. Interpret the results.

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

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Section
BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 7, Problem 7.1MAD
Textbook Problem
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Analyze and compare Amazon.com to Netflix

Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Netflix, Inc. (NFLX) provides digital streaming and DVD rentals in the United States. Amazon and Netflix compete in streaming and digital services; however, Amazon also sells many other products online. The cash, temporary investments, operating expenses, and depreciation expense from recent financial statements were reported as follows for both companies (in millions):

  Amazon Netflix
Balance sheet end of year:
Cash $ 19,334 $1,468
Short-term investments 6,647 266
Income statement
Operating expenses 131,801 8,451
Depreciation expense 8,116 4,925
  1. a. Determine the days’ cash on hand for Amazon and Netflix. Round all calculations to one decimal place.
  2. b. Chapter 7, Problem 7.1MAD, Analyze and compare Amazon.com to Netflix Amazon.com, Inc. (AMZN) is one of the largest Internet Interpret the results.

(a)

To determine

Days’ cash on hand: This is a financial metric which measures number of days a company would pay its cash operating expenses, if revenue declines. Days’ cash on hand of 50 days or greater is considered to be ideal.

Formula to compute days’ cash on hand:

Days’ cash on hand = Cash and short-term investmentsDaily cash operating expenses 

To compute: Days’ cash on hand for Incorporation A and Incorporation N

Explanation of Solution

Compute days’ cash on hand for Incorporation A, as shown below:

Days’ cash on hand = Cash and short-term investmentsDaily cash operating expenses =Cash + Short-term investments(Operating expenses–Depreciation expense)÷365 days=$19,334,000,000+$6,647,000,000($131,801,000,000–$8,116,000,000)÷365 days

=$25,981,000,000$338,863,013.7Days’ cash on hand=76

(b)

To determine

To interpret: The values computed in Part (a)

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Chapter 7 Solutions

Corporate Financial Accounting
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