A company reported average total assets of $501,000 in Year 1 and $611,000 in Year 2. Its net operating cash flow in Year 1 was $41,500 and $55,250 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.
What will be an ideal response?
The company had an increase in net operating cash flow and a corresponding increase in
average total assets over the two-year time period. Its efficiency in the use of its assets to
generate operating cash flow increased over the past year.
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