The following data came from the financial statements of the Green Company: Cash from operations$900,000Cash from investing activities350,000Cash from financing activities220,000Cash paid for capital expenditures55,000Net income425,000 Compute the cash flow-to-net income ratio.
Question
The following data came from the financial statements of the Green Company: Cash from operations$900,000Cash from investing activities350,000Cash from financing activities220,000Cash paid for capital expenditures55,000Net income425,000 Compute the cash flow-to-net income ratio.
Solution
The cash flow-to-net income ratio is calculated by dividing cash flow from operations by net income.
Here are the steps to calculate it:
Step 1: Identify the cash flow from operations and the net income from the given data.
From the data given, Cash flow from operations = 425,000
Step 2: Divide the cash flow from operations by the net income.
So, Cash flow-to-net income ratio = Cash flow from operations / Net income = 425,000 = 2.12
So, the cash flow-to-net income ratio of the Green Company is 2.12.
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