The question is:

Question

Compute the recent two years’ cash flow on total assets ratios for this company.
This is the info given:
Operating cash flow for current year (in millions): $1,762
1 year prior - $1,740
2 years prior - $1,981
Total Assets for current year - $13,570
1 year prior - $11,864
2 years prior - $10,294
I know that the cash flow ratio for total assets is Operating cash flows/average total assets.
My question is do I use the operating cash flows for current year and the total assets for current year and 1 year prior or current year and 1 and 2 years prior?
= 1,762/[(13,570+11,864+10,294)/3]
= 1,762/11,909.33
=14.8%
Or
= 1,762/[(13,570+11,864)/2]
= 1,762/12,717
=13.9%
And, does the cash flow on total assets ratio reflect on the quality of earnings?

Answer 1

Selected transactions for D. Reyes, an interior decorator in her first month of business, are as follows.

Jan.

2

Invested $10,000 cash in business.
3

Purchased used car for $4,000 cash for use in business.
9

Purchased supplies on account for $500.
11

Billed customers $1,800 for services performed.
16

Paid $200 cash for advertising.
20

Received $700 cash from customers billed on January 11.
23

Paid creditor $300 cash on balance owed.
28

Withdrew $1,000 cash for personal use of owner