Lucas Company has provided the following information:
• Cash flow from operating activities,$360,000
• Net income,$306,000
• Interest expense,$30,000
• Interest cash payments,$20,000
• Income tax payments,$240,000
• Income tax expense,$246,000
-
What was Lucas' quality of income ratio?
A)0.85
B)0.74
C)1.18
D)0.93

Question

Lucas Company has provided the following information: 
• Cash flow from operating activities,$360,000
• Net income,$306,000
• Interest expense,$30,000
• Interest cash payments,$20,000
• Income tax payments,$240,000
• Income tax expense,$246,000
-
What was Lucas' quality of income ratio?
A)0.85
B)0.74
C)1.18
D)0.93

Quizplus · Accepted Answer

1.18The quality of income ratio is calculated by dividing the cash flow from operating activities by the net income. For Lucas Company, this would be $360,000 / $306,000 = 1.176, which rounds to 1.18.

Lucas Company Has Provided the Following Information