Question

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A1). What is the excess cash for year 3, year 2, and year 1? What are the totals for the three years?

A2). Are the operating cash flows for year 3 been sufficient to pay dividends and investing needs?

Answer 1

Excess cash typically refers to the surplus funds held by a company that surpass its immediate operational and investment requirements. This surplus arises after covering day-to-day operating expenses, debt obligations, and planned investments. Companies often maintain excess cash for various purposes, such as future expansion, strategic investments, or as a financial buffer for unforeseen expenses. On the other hand, operating cash flow (OCF) represents the cash generated by a company from its core business operations, including the sales of goods and services. Operating cash flow is a key metric for assessing a company's financial health, liquidity, and its ability to meet short-term obligations without relying on external financing. In summary, excess cash signifies a company's surplus funds, while operating cash flow reflects its capacity to generate cash from routine business activities, both crucial elements in evaluating a company's financial position and strategic planning.

Answer 2

Excess cash refers to the surplus of cash and cash equivalents that a company holds beyond what is necessary for its day-to-day operational requirements. This additional liquidity serves various purposes, such as acting as a financial buffer for unforeseen emergencies, capitalizing on investment opportunities, facilitating strategic acquisitions, or ensuring readiness to meet future financial obligations. On the other hand, operating cash flow represents the cash generated or used by a company's core operating activities, excluding financing and investing endeavors. It encompasses the cash inflows and outflows related to day-to-day operations, providing valuable insights into a company's ability to generate cash from its primary business functions. Positive operating cash flow is vital for covering operating expenses, servicing debt, and supporting business growth. Together, excess cash and operating cash flow are pivotal indicators of a company's financial health, liquidity, and capacity to sustain and expand its operations.