The following data is given for DGR Company: Net cash flows from operating activities $ \quad \$ 6,000,000 $
Cash and cash equivalents at end of year $ \quad \$ 2,700,000 $ DGR Company's ratio of cash to monthly cash expenses is:
A) 4.5 months.
B) 5.4 months.
C) 8.1 months.
D) 3.2 months.

Question

Quizplus · Accepted Answer

The ratio of cash to monthly cash expenses is calculated by dividing cash and cash equivalents at the end of the year by the average monthly cash expenses. The average monthly cash expenses can be found by dividing the net cash flows from operating activities by 12 months. Thus, the ratio is $ \frac{2,700,000}{6,000,000/12} = 5.4 $ months.

The Following Data Is Given for DGR Company: Net Cash $6,000,000 \quad \$ 6,000,000 $6,000,000

The Following Data Is Given for DGR Company: Net Cash $\quad \$ 6,000,000$