Question

Dora Inc. reported the following on the company's cash flow statement: Sales $3,500,000 Net cash flow from operating activities 350,000 Net cash flow used for investing activities (100,000) Net cash flow used for financing activities (200,000) Free cash flow 290,000 What is the ratio of free cash flow to sales

Answer 1

Answer:

8.3%

Explanation:

Dora Inc. reported a sales of $3,500,000

The net cash flow from operating activities is $350,000

The net cash flow used for investing activities is $100,000

The net cash flow used for financial activities is $200,000

The free cash flow is $290,000

Therefore, the free cash flow to sales ratio can be calculated as follows

Free cash flow to sales ratio= Free cash flow/Sales × 100%

= $290,000/$3,500,000 × 100

= 0.0828×100

= 8.3%

Hence the ratio of the free cash flow to sales is 8.3%