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 $(630)
Cash and cash equivalents as of end of year 525
a. 12.0
b. 10.0
c. 14.4
d. None of these choices are correct.

Answer 1

To calculate the ratio of cash to monthly cash expenses, divide the total annual cash expenses by 12 to find the monthly cash expenses, then divide the cash and cash equivalents at year-end by the monthly cash expenses. The ratio is 10.0.

Step-by-step explanation:

To find the ratio of cash to monthly cash expenses, we first need to establish the monthly cash expenses.

Since we have a negative cash flow from operations of $(630) for the year, we can assume that these are the total cash expenses for the year. Divide this amount by 12 to find the monthly cash expenses:

Monthly cash expenses = Total annual cash expenses / 12 = $630 / 12 = $52.50

Now, with the cash and cash equivalents at the end of the year being $525, the ratio of cash to monthly cash expenses is:

Ratio = Cash and cash equivalents at year-end / Monthly cash expenses = $525 / $52.50 = 10

Therefore, the ratio of cash to monthly cash expenses is 10.0, which corresponds to option b.