In 2013, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 2012, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 2013 and 2012 respectively?
A) .23 and .37
B) 4.31 and 2.68
C) 1.10 and .68
D) .91 and 1.46

Question

Quizplus · Accepted Answer

The quality of earnings ratio is calculated as cash flow from operations divided by net earnings. For 2013, it is $5.6 billion / $1.3 billion = 4.31. For 2012, it is $5.1 billion / $1.9 billion = 2.68.

In 2013, the W D Company Reported Net Earnings of $1.3