Question

All of the following statements are true with regards to the ratio of cash to monthly cash expenses except

a. it helps assess how long a company can operate without additional financing.
b. it is calculated using cash at the beginning of the year.
c. it is useful to analyze companies in financial distress.
d. it helps assess how long a company can operate without generating positive cash flows from operations.

Answer 1

The ratio of cash to monthly cash expenses helps assess how long a company can operate without additional financing and without generating positive cash flows from operations. It also helps analyze companies in financial distress and determine their ability to cover their expenses.

Step-by-step explanation:

The statement that is not true with regards to the ratio of cash to monthly cash expenses is option B: it is calculated using cash at the beginning of the year. The ratio of cash to monthly cash expenses is a measure used to assess how long a company can operate without additional financing and without generating positive cash flows from operations. It helps analyze companies in financial distress and determine their ability to cover their expenses.