(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $700,000, cash flow from financing activities of $60,000, depreciation expenses of $40,000, and cash flow from operating activities of $600,000. a. Calculate the quality of earnings ratio. What does this ratio tell you? b. Kabutell, Inc. reported the following in its annual reports for 2011-2013: ($ million) 2011 Cash Flow from Operations $477 Capital Expenditures (CAPEX) $461 (Click on the icon in order to copy its contents into a spreadsheet.) Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results? 2012 $403 $447 2013 $471 $455
(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $700,000, cash flow from financing activities of $60,000, depreciation expenses of $40,000, and cash flow from operating activities of $600,000. a. Calculate the quality of earnings ratio. What does this ratio tell you? b. Kabutell, Inc. reported the following in its annual reports for 2011-2013: ($ million) 2011 Cash Flow from Operations $477 Capital Expenditures (CAPEX) $461 (Click on the icon in order to copy its contents into a spreadsheet.) Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results? 2012 $403 $447 2013 $471 $455
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $700,000, cash flow from financing activities
of $60,000, depreciation expenses of $40,000, and cash flow from operating activities of $600,000.
a. Calculate the quality of earnings ratio. What does this ratio tell you?
b. Kabutell, Inc. reported the following in its annual reports for 2011-2013:
($ million)
2011
Cash Flow from Operations
$477
Capital Expenditures (CAPEX)
$461
(Click on the icon in order to copy its contents into a spreadsheet.)
Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results?
2012
$403
$447
85.7% (Round to one decimal place.)
What does this ratio tell you? (Select the best choice below.)
2013
$471
$455
O A. Kabutell's reported net income was 85.7 percent of the firm's cash flow from operations. The firm depends
mainly on operating source of cash to generate its net income.
OB. Kabutell's cash flow from operations was 85.7 percent of the firm's reported net income. The firm depends
mainly on non-operating source of cash to generate its net income.
OC. Kabutell's cash flow from operations was 85.7 percent of the firm's reported net income. The firm depends
mainly on operating source of cash to generate its net income.
OD. Kabutell's reported net income was 85.7 percent of the firm's cash flow from operations. The firm depends
mainly on non-operating source of cash to generate its net income.
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