Action Therapeutics, Inc., reported the following financial data (in thousands) for the years ending December 31, Year 3, Year 2, and Year 1.

For years ended December 31

Year 3 Year 2 Year 1

Cash and cash equivalents $40,480 $20,460 $13230

Net cash flows from operations 55200 39,600 32,400

Compute the ratio of cash to monthly cash expenses for Years 1 and 2. Round your answers to one decimal place.

The ratio of cash to cash expenses in year 1 is 0.69 and 1.07 in year 2

Explanation:

The monthly cash expense is net cash flows from operations minus cash and cash equivalents for the year.

Year 1 Year 2

Net cash flows from operations $32,400 $39,600

less cash and cash equivalents ($13,230) ($20460)

Cash expense $19,170 $19,140

Ratio of cash to cash expenses (cash and cash equivalents/cash expense)

cash and cash equivalents $13,230 $20460

Cash expense $19,170 $19,140

Ratio of cash to cash expense 0.69 1.07

This ratio examines the relationship between cash spent in a year versus the cash balance as at the end of the year.