Multiple Choice
Tougher Company's had the following data for 2018 and 2017:
What was the increase or decrease in the ratio of cash to monthly cash expenses in 2018?
14. Financial Statement Analysis
Ratios: Cash to Monthly Cash Expenses
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The Liquid Company had a cash balance at the end of the current year of $14,511. If the monthly cash expenses total $3,495, how long could Liquid stay in business before going bankrupt, assuming no cash inflows?
A
4.15 months
B
3.12 months
C
6.33 months
D
Not enough information
Verified step by step guidance1
Identify the total cash balance available at the end of the current year, which is $14,511.
Determine the monthly cash expenses, which are given as $3,495.
To find out how long the company can stay in business without any cash inflows, divide the total cash balance by the monthly cash expenses.
Set up the equation: \( \text{Number of months} = \frac{\text{Total Cash Balance}}{\text{Monthly Cash Expenses}} \).
Calculate the result of the division to determine the number of months Liquid Company can continue operations before exhausting its cash reserves.
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