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Operating-Cash-Flow-to-Capital-Expenditures Ratio The following information is from the financial statements of Smith & Sons. Cash flow...

Operating-Cash-Flow-to-Capital-Expenditures Ratio
The following information is from the financial statements of Smith & Sons.

Cash flow from operating activities $3,000,000
Capital expenditures 1,530,000
Current liabilities, beginning of year 600,000
Current liabilities, end of year 720,000

Calculate the operating-cash-flow-to-capital-expenditures ratio for Smith & Sons.

Round answer to two decimal places.

Answer

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Answer #1

There might be two possibilities since it's not specified in the question that whether the adjustment for current liabilities has been done or not.

1. Assuming adjustment for current liabilities has not been done.

Net cash flow from operating activities

= 3000000+ increase in current liabilities

= 3000000+120000

= 3120000

Operating cash flow to capital expenditure ratio

= 3120000/1530000

=2.04

2. Assuming that current liabilities adjustment has been made.

Operation cash flow to capital expenditure ratio

= 3000000/1530000

= 1.96

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