Farm Store, Inc

question 32

Essay

Farm Store, Inc. reported the following data in its December 31 annual report.
Cash and cash equivalents
$1,050,000
Negative cash flows from operations
420,000)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.?

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Definitions:

Long Run

A period of time in economics where all factors of production and costs are variable, allowing for full adjustment to changes.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners over a specific time period, indicating the flow of capital out of a country.

Mexican Assets

Financial investments or physical properties located in Mexico, including stocks, bonds, real estate, and other forms of assets.

Pesos

The official currency of Mexico and several other Latin American countries.