The cash flow on total assets ratio:
A) Is the same as return on assets.
B) Is the same as profit margin.
C) Can be an indicator of earnings quality.
D) Is highly affected by accounting principles of income recognition and measurement.
E) Is average net assets divided by cash flows from operations.

Question

Quizplus · Accepted Answer

The cash flow on total assets ratio (also known as the cash return on assets ratio) is an indicator of a company's ability to generate cash flow from its assets. It is calculated by dividing operating cash flow by total assets. It can be a useful indicator of earnings quality because it measures the cash flow generated by a company's assets, rather than just its reported earnings, which can be affected by accounting principles of income recognition and measurement. Therefore, choice C is the best answer.

The Cash Flow on Total Assets Ratio