Question

Given the following information for the year ended December 31, what is the ratio of cash to monthly cash expenses? Negative cash flow from operations $(540) Cash and cash equivalents as of year-end.

a. 10.0
b. 12.0
c. 14.4
d. None of these choices are correct.

Answer 1

d. None of these choices are correct.

Explanation:

For computation of ratio of cash to monthly cash expenses first we need to find out the monthly cash expenses which is shown below:-

Monthly Cash Expenses = Negative cash Flow ÷ Number of Months in a year

= $540 ÷ 12

= $45

The ratio of Cash To Monthly Cash Expenses = Cash and cash equivalents at Year End ÷ Monthly Cash Expenses

= $495 ÷ $45

= 11

Therefore for computing the ratio of Cash To Monthly Cash Expenses we simply applied the above formula.