Question

1. Analyze net change in financial activities for Southwest airlines. Include discussion of whether the company obtained new debt or equity financing over the last 3 years, how the company’s debt and equity changed, and whether the company paid down debt or equity in the last 3 years.
2. Explain the pros and cons of having a large cash balance.

Answer 1

Answer:

• Holding high cash balances usually means you're missing out a bigger return elsewhere. Cash accounts such as checking and saving accounts, are safe because they're covered by deposit insurance....upto the $250,000 per financial institution and you won't lose money using them.
• If a busness has excess cash then it should hava little trouble obtaining loan
• The only real disadvantage to a large cash balance is the fact that money in the bank limits a business ability to grow. While it makes sense for a business to mantain some liquid assets, the rest of its income can usually go to more profitable use by strethenng the company or paying for expensiion

If a business has excess cash Then it can expend without having to pay lending cost.

Futhermore businesses with excess cash have less needs to borrow than business with minimal cash reserves.