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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
The question is: Compute the recent two years’ cash flow on total assets ratios for this company. This is the info given: Operating cash flow for current year (in millions): $1,762 1 year prior - $1,740 2 years prior - $1,981 Total Assets for current year - $13,570 1 year prior - $11,864 2 years prior - $10,294 I know that the cash flow ratio for total assets is Operating cash flows/average total assets. My question is do I use the operating cash flows for current year and the total assets for current year and 1 year prior or current year and 1 and 2 years prior? = 1,762/[(13,570+11,864+10,294)/3] = 1,762/11,909.33 =14.8% Or = 1,762/[(13,570+11,864)/2] = 1,762/12,717 =13.9% And, does the cash flow on total assets ratio reflect on the quality of earnings?
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