Which of the following statements concerning the cash adequacy ratio is true?
A) It measures the entity's ability to reinvest in its operations and to make distributions to owners from its operating cash flow.
B) It expresses the cash flow from operating activities as a percentage of capital expenditure plus dividends.
C) A ratio result greater than one suggests a good performance.
D) All of the statements are true.

Question

Quizplus · Accepted Answer

All the statements accurately describe aspects of the cash adequacy ratio, which assesses a company's ability to manage its operating cash flow for reinvestment, distributions, and its sufficiency in covering capital expenditures and dividends.

Which of the Following Statements Concerning the Cash Adequacy Ratio