The cash flow on total assets ratio of A and G for the two most recent years.

Question

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Answer 1

Question

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

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Students have asked these similar questions

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Answer 2

Question

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

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Answer 3

Question

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

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Answer 4

Question

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

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Answer 5

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

Answer 6

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

Answer 7

Chapter 12, Problem 2BTN

1.

To determine

The cash flow on total assets ratio of A and G for the two most recent years.

Answer 8

1.

Expert Solution

Explanation of Solution

Calculate the cash flow on total assets ratio of A for the current year.

Cash flow from operation for the current year is $53,666.

Average total asset is $207,000.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 53, 666}{$ 207, 000} \\ = 0.26 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for A is 0.26.

Calculate the cash flow on total assets ratio of A for the previous year.

Cash flow from operation for the current year is $50,856.

Average total asset is $176,064.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 50, 856}{$ 176, 064} \\ = 0.29 \end{matrix}$

Hence, the cash flow on total assets ratio in the previous year for A is 0.29.

Calculate the cash flow on total assets ratio of G for the current year.

Cash flow from operation for the current year is $18,659.

Average total asset is $110,920.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operation}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 18, 659}{$ 110, 920} \\ = 0.17 \end{matrix}$

Hence, the cash flow on total assets ratio in the current year for G is 0.17.

Calculate the cash flow on total assets ratio of G for the previous year.

Cash flow from operation for the current year is $16,619.

Average total asset is $93,798.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 16, 619}{$ 93, 798} \\ = 0.18 \end{matrix}$

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

Hence, the cash flow on total assets ratio in the previous year for G is 0.18.

Answer 13

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

Answer 14

2.

To determine

To state:

The purpose of cash flow on total assets ratio.

Answer 15

2.

Expert Solution

Explanation of Solution

The purpose of cash flow on total assets ratio is explained as follows.

• Cash flow on total assets is a cash-based ratio that helps in evaluating a company’s position to meet its obligations.

• It helps in understanding the quality of earning of a company.

• A company is said to be have good quality of earning, if the cash flow on total assets exceeds the return on total assets.

• It helps in measuring how efficiently a company is using its assets to create a return or income.

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Conclusion

Hence, the purpose of cash flow on total assets ratio is discussed as above.

Answer 20

3.

To determine

The company with highest cash flow on total ratio for the given period.

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

Answer 21

3.

To determine

The company with highest cash flow on total ratio for the given period.

Answer 22

3.

Expert Solution

Explanation of Solution

From the calculation in the first part, the following conclusions are obtained.

The cash flow on total assets ratio in the current year for A is 0.26.

The cash flow on total assets ratio in the first previous year for A is 0.29.

The cash flow on total assets ratio in the current year for G is 0.17.

The cash flow on total assets ratio in the first previous year for G is 0.18.

Now, the cash flow on total assets ratio for the second previous year for A and G is to be calculated.

Calculate the cash flow on total assets ratio of A and G for the second previous year.

For A Company:

Cash flow from operation for the current year is $37,529.

Average total asset is $116,371.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 37, 529}{$ 116, 371} \\ = 0.32 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32.

For G Company:

Cash flow from operation for the current year is $14,565.

Average total asset is $72,574.

Required formula:

$Cash flow on total assets = \frac{Cash flow from operations}{Average total assets}$

Calculation:

$\begin{matrix} Cash flow on total assets = \frac{$ 14, 565}{$ 72, 574} \\ = 0.20 \end{matrix}$

Hence, the cash flow on total assets ratio in the second previous year for G is 0.20.

Answer 23

3.

Expert Solution

Answer 24

3.

Expert Solution

Answer 25

Expert Solution

Answer 26

Conclusion

Hence, the cash flow on total assets ratio in the second previous year for A is 0.32, which is the highest between the two companies in the given periods.

Answer 27

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.

Conclusion

Hence, the cash flow on total assets reflects the quality of earning of a company.

Answer 28

4.

To determine

Whether the cash flow on total assets reflects the earnings quality.

Answer 29

4.

Expert Solution

Explanation of Solution

• Cash flow on total assets ratio reflects the quality of earning. If the cash flow on the total assets ratio of a company shows a higher percentage than competitors or industry average, then the company has a competitive advantage over them and it would definitely meets its obligation.

• Investors would invest in the company, as the company is efficiently using its assets to create incomes and thereby, it will improve the quality of earnings of the company.