A ﬁnancial manager who needs to ﬁnd out how long it will take before their ﬁrm runs out of cash if no further cash comes in should consider the ________________.
A) Current ratio.
B) Quick ratio.
C) Cash ratio.
D) Net working capital to total assets ratio.
E) Interval measure.

Question

Quizplus · Accepted Answer

The interval measure is the best choice for finding out how long a firm can operate before running out of cash if no further cash comes in. This ratio calculates how many days a company can operate using its current cash reserves without any additional inflow of cash. Therefore, it directly addresses the concern of a ﬁnancial manager who needs to find out how long it will take before their ﬁrm runs out of cash if no further cash comes in. The other ratios (Current ratio, Quick ratio, Cash ratio, and Net working capital to total assets ratio) do not provide a clear indication of how long a firm can operate before running out of cash.

A ﬁNancial Manager Who Needs to ﬁNd Out How Long