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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cash to monthly cash expenses ratio

El Dorado Inc. has monthly cash expenses of $l68,500. On December 31, the cash balance is $1,415,400.

  1. a. Compute the ratio of cash to monthly cash expenses.
  2. b. Based on (a), what are the implications for El Dorado Inc.?

(a)

To determine

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.

To compute: Ratio of cash to monthly cash expenses.

Explanation
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...

(b)

To determine
the implications of ED incorporation.

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