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Capstone Turbine Corporation produces and sells turbine generators for such applications as charging electric, hybrid vehicles. Capstone Turbine reported the following financial data for a recent year (in thousands): a. Determine the monthly cash expenses. Round to one decimal place. b. Determine the ratio of cash to monthly cash expenses. Round to one decimal place. c. Based on your analysis, do you believe that Capstone Turbine will remain in business?
Financial Accounting
Solutions
Financial Accounting
Capstone Turbine Corporation produces and sells turbine generators for such applications as charging electric, hybrid vehicles. Capstone Turbine reported the following financial data for a recent year (in thousands):
- a. Determine the monthly cash expenses. Round to one decimal place.
- b. Determine the ratio of cash to monthly cash expenses. Round to one decimal place.
- c. Based on your analysis, do you believe that Capstone Turbine will remain in business?
a)
Compute monthly cash expenses.
Explanation of Solution
Cash and cash equivalents: Cash is the money readily available in the form of currency. Cash equivalents are the near-cash items, which are readily convertible into cash. Cash equivalents have a maturity period of three months, or less than 3 months.
Monthly cash expenses: Monthly cash expenses are those cash expenses that are estimated from the operating activities section of the statement of the cash flows. These monthly cash expenses are otherwise referred to cash burn.
Formula:
Compute monthly cash expenses
b)
Compute the ratio of cash to monthly cash expenses.
c)
Explain the implications of ratio.
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