Reading 34: Understanding the Cash Flow Statement - LOS i,

ability, measures, following, describes, best

Q1. Which of the following best describes a ratio that measures a firm’s ability to acquire long-term assets with cash flows from operations, and a performance ratio, respectively?

Acquire assets with CFO Performance ratio

A) Investing and financing ratio Cash-to-income ratio

B) Reinvestment ratio Debt payment ratio

C) Reinvestment ratio Cash-to-income ratio

mayanfang1

游客

UID: 98270
帖子: 2466
主题: 1243
注册时间: 2008-5-26
最后登录: 2009-1-22

2^#

发表于 2009-1-17 14:02 | 只看该作者

答案和详解如下：

Q1. Which of the following best describes a ratio that measures a firm’s ability to acquire long-term assets with cash flows from operations, and a performance ratio, respectively?

Acquire assets with CFO Performance ratio

A) Investing and financing ratio Cash-to-income ratio

B) Reinvestment ratio Debt payment ratio

C) Reinvestment ratio Cash-to-income ratio

Correct answer is C)

The reinvestment ratio measures a firm’s ability to acquire long-term assets with cash flows from operations. In contrast, the investing and financing ratio, which is more comprehensive, measures the firm’s ability to purchase assets, satisfy debts, and pay dividends.

The cash-to-income ratio measures the ability to generate cash from a firm’s operations and is a performance ratio for cash flow analysis purposes. The debt payment ratio measures the firm’s ability to satisfy long-term debt with cash flow from operations but it is more of a coverage ratio than a performance ratio.