Question

Coda Corporation had the following data for the year: Net cash flow from operating activities: $1,844,000 Current liabilities at January 1: $2,400,000 Current liabilities at December 31: $3,200,000 Compute the operating-cash-flow-to-current-liabilities ratio.

Answer 1

The operating-cash-flow-to-current-liabilities ratio is calculated by dividing the net cash flow from operating activities by the average current liabilities. With the provided data, the ratio for Coda Corporation would be 0.66, rounded to two decimal places.

Step-by-step explanation:

The student's question regarding the computation of the operating-cash-flow-to-current-liabilities ratio is a financial analysis topic in the field of business accounting. To calculate this ratio, we must use the net cash flow from operating activities and average current liabilities over the period.

The formula for computing the operating cash flow to current liabilities ratio is:

Operating Cash Flow to Current Liabilities Ratio = Net Cash Flow from Operating Activities / Average Current Liabilities

Since we know the net cash flow from operating activities is $1,844,000, and we have the current liabilities at the start and end of the year, we can find the average current liabilities:

Average Current Liabilities = (Current Liabilities at January 1 + Current Liabilities at December 31) / 2

Average Current Liabilities = ($2,400,000 + $3,200,000) / 2

Average Current Liabilities = $5,600,000 / 2

Average Current Liabilities = $2,800,000

Now, we can compute the ratio:

Operating Cash Flow to Current Liabilities Ratio = $1,844,000 / $2,800,000

Operating Cash Flow to Current Liabilities Ratio = 0.66 (rounded to two decimal places)