Asked by Libby Burchett on Jun 11, 2024
Verified
Aspen, Inc. reported the following data in its annual report:?
Cash and cash equivalents $460,000
Cash flow from operations
(240,000)?Required
(1) What is the company's "cash burn" per month?
(2) What is the company's ratio of cash to monthly cash expenses?
Cash Burn
The rate at which a company spends its cash reserves before generating positive cash flow.
Cash Equivalents
Highly liquid investments that are readily convertible to known amounts of cash and have an original maturity of three months or less.
Monthly Cash Expenses
The total amount of money spent by an individual or business in cash over the course of a month.
- Assess a corporation's cash movements, the velocity of cash depletion, and the cash-to-monthly expenses ratio, and conclude their impact on business endurance.
Verified Answer
CE
Chloe EubankJun 14, 2024
Final Answer :
(1) $240,000/12 = $20,000 per month
(2) $460,000/$20,000 = 23 months
(2) $460,000/$20,000 = 23 months
Learning Objectives
- Assess a corporation's cash movements, the velocity of cash depletion, and the cash-to-monthly expenses ratio, and conclude their impact on business endurance.