Question

Given the following information for the year ended December 31, what is the ratio of cash to monthly cash expenses?

Negative cash flows from operations $(720)
Cash and cash equivalents as of end of year 540
a. None of these choices are correct.
b. 9.0
c. 12.0
d. 16

Answer 1

The ratio of cash to monthly cash expenses is -0.75.

Step-by-step explanation:

To calculate the ratio of cash to monthly cash expenses, you need to divide the cash and cash equivalents by the monthly cash expenses. In this case, the cash and cash equivalents at the end of the year are $540. To find the monthly cash expenses, we need to consider the negative cash flows from operations, which are $(720). So, the ratio would be:

Ratio = Cash and cash equivalents / Monthly cash expenses

Ratio = $540 / $(720) = -0.75

Therefore, the ratio of cash to monthly cash expenses is -0.75.