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

question 69

Essay

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.?

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Definitions:

Present Value Methods

Techniques used to determine the current worth of a future cash flow, stream of cash flows, or an investment, by discounting them at a specific rate.

Net Present Value

A financial metric that calculates the value of a project or investment in terms of its present value of net cash inflows minus the present value of its costs.

Cash Payback Period

The length of time it takes for an investment or project to generate enough cash flows to recover its initial cost.

Present Value Factor

The present value factor is a factor used to calculate the present value of a future amount, considering a specific interest rate over a set period.