The formula to calculate the Days of Cash on Hand (D) is:
\[ \text{D} = \left(\frac{\text{C}}{\text{E}}\right) \times \text{N} \]
Where:
Let's say the cash and cash equivalents (C) are $50,000, the operating expenses (E) are $5,000, and the number of days in the period (N) is 30. Using the formula:
\[ \text{D} = \left(\frac{50,000}{5,000}\right) \times 30 = 10 \times 30 = 300 \]
So, the days of cash on hand is 300 days.
Definition: Days cash on hand is the number of days that an organization can continue to pay its operating expenses, given the amount of cash available.
Formula: \( \text{Days Cash on Hand} = \frac{\text{Cash on Hand}}{\left( \frac{\text{Annual Operating Expense} - \text{Non-Cash Items}}{365} \right)} \)
Example: \( \text{Days Cash on Hand} = \frac{200,000}{\left( \frac{800,000 - 40,000}{365} \right)} \)
Definition: The number of days of cash on hand indicates how long a company can cover its operating expenses with the cash it currently has.
Formula: \( \text{Days of Cash on Hand} = \frac{\text{Cash on Hand}}{\left( \frac{\text{Operating Expenses} - \text{Depreciation}}{365} \right)} \)
Example: \( \text{Days of Cash on Hand} = \frac{150,000}{\left( \frac{600,000 - 30,000}{365} \right)} \)
Definition: The days cash on hand ratio measures the liquidity of a company by calculating the number of days it can continue to pay its operating expenses with the cash available.
Formula: \( \text{Days Cash on Hand Ratio} = \frac{\text{Cash Available}}{\left( \frac{\text{Annual Expenses} - \text{Non-Cash Expenses}}{365} \right)} \)
Example: \( \text{Days Cash on Hand Ratio} = \frac{250,000}{\left( \frac{900,000 - 50,000}{365} \right)} \)
