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 $(540)
Cash and cash equivalents as of end of year 495
a. None of these choices are correct.
b. 12.0
c. 13.1
d. 11.0

Answer 1

The ratio of cash to monthly cash expenses is 11.0.

Step-by-step explanation:

The ratio of cash to monthly cash expenses can be calculated by dividing the cash and cash equivalents by the monthly cash expenses. In this case, cash and cash equivalents at the end of the year are $495, and the negative cash flows from operations are $540 for the year ended December 31.

To find the monthly cash expenses, we first need to divide the negative cash flows from operations by 12 to get the average monthly cash flows. Therefore, monthly cash expenses are $540 / 12 = $45.

Now, we can calculate the ratio of cash to monthly cash expenses by dividing cash and cash equivalents by monthly cash expenses: $495 / $45 = 11.0.

Therefore, the ratio of cash to monthly cash expenses is 11.0 (option d).