Farm Store,Inc $\begin{array}{llcc} \text { Cash and cash equivalents } & \$ 1,050,000 \\ \text { Negative cash flows from operations } & 420,000\end{array}$

Farm Store,Inc.reported the following data in its December 31 annual report.
$\begin{array}{llcc} \text { Cash and cash equivalents } & \$ 1,050,000 \\ \text { Negative cash flows from operations } & 420,000\end{array}$
a What is the company's "cash burn" per month?
b What is the company's ratio of cash to monthly cash expenses?
c Interpret the ratio you computed in part 2.What are the implications for Farm Store,Inc.?

Correct Answer:

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a. $420,000/12 = $35,000 per month

b. ...

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