Question

A company had average total assets of $3,860,000, total cash flows of $2,640,000, cash flows from operations of $535,000, and cash flows from financing of $1,410,000.

The cash flow on total assets ratio equals:..............

Answer 1

The cash flow on total assets ratio measures a company's ability to generate cash flow relative to its total assets. It is calculated by dividing cash flows from operations by average total assets.

So, in this case, the cash flow on total assets ratio is:

Cash flow on total assets = Cash flows from operations / Average total assets

Average total assets = ($3,860,000 + $3,860,000) / 2 = $3,860,000

Cash flow on total assets = $535,000 / $3,860,000 = 0.1385

Therefore, the cash flow on total assets ratio for the company is 0.1385 or 13.85%.