Formula: (Cash + Marketable Securities) / (Operating Expenses - Depreciation / 365 Days )
The Days Cash For Operating Expenses formula calculates the number of days of cash you have on hand to cover the expenses necessary to run your
operation. In other words, if your company's revenues suddenly stopped, it can survive only as long as it has enough cash to pay expenses before
it needs to obtain more financing.
A higher Days Cash For Operating Expenses ratio indicates you can operate longer without worrying about paying the bills. Your company
and profitability are healthy. However, things can change quickly, so you should consistently track Days of Cash on a regular basis to make sure it stays in the good zone.
A lower Days Cash For Operating Expenses ratio indicates you may be in financial distress and are struggling to keep the company afloat. You’re probably
concerned about paying your vendors and when you will get paid by your customers. You may be holding back vendor payments until after the cash
arrives which could mean your payables may be understated on your balance sheet as a result.
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