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? a.8.3% b.1.4% c.10.0% d.12.0%

Answer 1

Answer:

option a. 8.3%

Explanation:

Data provided in the question:

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

Now,

The Free Cash Flow to Sales Ratio = [ Free Cash Flow ÷ Sales ] × 100 %

= [ $290,000 ÷ $3,500,000 ] × 100 %

= 8.3%

Hence,

The correct answer is option a. 8.3%