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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 8, Problem 5PEB
Textbook Problem
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Financial data for Bonita Company follow:

Chapter 8, Problem 5PEB, Financial data for Bonita Company follow:  a. Compute the ratio of cash to monthly cash expenses.

  1.        a.            Compute the ratio of cash to monthly cash expenses.
  2.       b.            Interpret the results computed in (a).

(1)

To determine

Compute ratio of cash to monthly cash expenses.

Explanation of Solution

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:Monthly cash expenses = Negative cash flow from operations 12

Ratio of cash to monthly cash expenses ratio is used to make assessment of company whether how long it can determine without additional financing and positive cash flows generated from operations.

Formula:Ratio of cash to monthly cash expenses = Cash as of 

(2)

To determine

Interpret the results of ratio.

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Chapter 8 Solutions

Financial Accounting
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