Nike, lululemon, and Under Armour: Days’ cash on hand Three companies that compete in the athletic and activewear market segment are Nike, Inc., lululemon athletica inc., and Under Armour, Inc. Nike is the largest designer and seller of athletic footwear and apparel in the world. Lululemon designs and sells technical athletic apparel featuring yoga, fitness, and dance-inspired wear. Under Armour designs and sells athletic apparel featuring high-performance fabrics for men and women around the world. Selected financial information for a recent year follows (in millions): Nike lululemon UnderArmour Balance sheet: Cash $ 2,220 $ 664 $ 593 Temporary investments 2,922 Income statement: Operating expenses 8,766 538 1,158 Depreciation expense 518 58 72 Total revenues 27,799 1,797 3,084 A. How does the size of these companies, as represented by total revenues, compare to each other? B. Compute the days’ cash on hand for all three companies. (Round all calculations to one decimal place.) C. Comment on the cash sufficiency for these three companies. D. Which company appears to have the greatest cash liquidity? E. Why is a ratio used to compare cash sufficiency across the three companies rather than just the companies’ cash balances?

Q: Expert Answer

(a) To determine Cash and cash equivalents : Cash is the money readily available in the form of currency. Cash equivalents are the near-cash items, which are readily convertible into cash. Cash equivalents have a maturity period of three months, or less than 3 months. Cash and cash equivalents are reported in the Current assert section of the balance sheet. Examples of cash equivalents Certificates of deposit U.S. government securities Corporate notes and bonds Commercial paper The size of companies. Explanation N’s total revenue is $27.8 billion. This company is the largest company and is 15 t... (b) To determine To compute: Days’ cash on hand for all three companies. (c) To determine To comment: Cash sufficiency (d) To determine The company with greatest liquidity (e) To determine the reason for using ratios to compare the cash sufficiency

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Answer 1

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Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

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Answer 2

BuyFind

Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

Solutions

Chapter

Section

Answer 3

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Section

Answer 4

Chapter

Section

Answer 5

(a)

To determine

Cash and cash equivalents: Cash is the money readily available in the form of currency. Cash equivalents are the near-cash items, which are readily convertible into cash. Cash equivalents have a maturity period of three months, or less than 3 months. Cash and cash equivalents are reported in the Current assert section of the balance sheet.

Examples of cash equivalents

Certificates of deposit
U.S. government securities
Corporate notes and bonds
Commercial paper

The size of companies.

Explanation of Solution

N’s total revenue is $27.8 billion. This company is the largest company and is 15 t...

Answer 6

(b)

To determine

To compute: Days’ cash on hand for all three companies.

Answer 7

(c)

To determine

To comment: Cash sufficiency

Answer 8

(d)

To determine

The company with greatest liquidity

Answer 9

(e)

To determine

the reason for using ratios to compare the cash sufficiency

Corporate Financial Accounting

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Corporate Financial Accounting

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Additional Business Textbook Solutions

	Nike	lululemon	UnderArmour
Balance sheet:
Cash	$ 2,220	$ 664	$ 593
Temporary investments	2,922
Income statement:
Operating expenses	8,766	538	1,158
Depreciation expense	518	58	72
Total revenues	27,799	1,797	3,084