Question

TearLab Corp. is a health care company in developing diagnostic devices for eye disease. TearLab reported the following data(in thousands) for three recent years.
For Years Ended December 31
Cash and cash equivalents-
Year3 - $13,838 Year2- $16,338 Year1- $37,778
Net cash flows from operations-
Year3-(23,703) Year2- (18,172) Year1- (13,234)
Question1
(a) Determine the monthly cash expenses for Year3, Year2, and Year1.Round to one decimal place.
(b) Determine the ratio of cash to monthly cash expenses as of December31 for Year 3, Year 2, and Year 1. Round to one decimal place.
(c) Based on question 1 (a) and (b) , comment on TearLab's ratio of cash to monthly operating exoenses for Year 3, Year 2, and Year 1.

Answer 1

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Tear Lab Corp.
Answer a- Calculation of monthly cash expenses
	Year 3	Year 2	Year 1
Net cash flows from operations	23,703.00	18,172.00	13,234.00
Number of months	12.00	12.00	12.00
Monthly cash expenses	1,975.30	1,514.30	1,102.80
Answer b- ratio of cash to monthly cash expenses
	Year 3	Year 2	Year 1
Monthly cash expenses	1,975.30	1,514.30	1,102.80
Cash and cash equivalents	13,838.00	16,338.00	37,778.00
Ratio of cash to monthly cash expenses (months)	7.00	10.80	34.30
Comment
After the completion of first year, Tear Lab's cash and cash equivalent as on that date can be used in operations for next 34.3 months if monthly cash expenses is same as year 1.
After the completion of second year, Tear Lab's cash and cash equivalent as on that date can be used in operations for next 10.8 months if monthly cash expenses is same as year 2.
After the completion of third year, Tear Lab's cash and cash equivalent as on that date can be used in operations for next 7 months if monthly cash expenses is same as year 3.