Question

a company had net cash flows from operations of $139,000, cash flows from financing of $368,000, total cash flows of $557,000, and average total assets of $3,640,000. the cash flow on total assets ratio equals:

Answer 1

The Cash flow on total assets ratio equals 3.8%.

Cash flow on total assets = cash flows from operations / average total assets

= 139,000 / 3,640,000 = 3.8%

A measure of profit called cash flow on total assets measures actual cash flows to the assets of the business without taking into account income recognition or income measurements. By dividing operating cash flows by average total assets, one can obtain the cash flow on total assets ratio. There may be a considerable reason for concern if the ratio falls below 10%. For a business to sustain long-term growth, it is necessary to have a positive cash flow, which essentially implies that more money goes into the till than it does out.

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