Ratio Analysis Following are totals from selected financial statements of Magdal

Question

Ratio Analysis

Following are totals from selected financial statements of Magdalene Corporation for the years ended December 31, 2013, and 2014:

Required:

1. Calculate the operating cash flow ratio for the year ended December 31, 2014. If required, round your answer to two decimal places.

Operating cash flow ratio =

2. Calculate the operating cash flow to total liabilities ratio for the year ended December 31, 2014. If required, round your answer to two decimal places.

Operating cash flow to total liabilities ratio =

12/31/13 12/31/14 Cash flows provided by operating activities $106,000 $91,000 Cash flows provided by investing activities 20,000 40,000 Cash flows used by financing activities -41,000 -61,000 Net increase in cash $85,000 $70,000 Net income $63,000 $30,000 Current assets 125,000 142,000 Total assets 575,000 657,000 Current liabilities 89,000 114,000 Total liabilities 381,000 450,000

Explanation / Answer

1. Operating cash flow ratio = Operating cash flow/ Current liabilities = 91,000/114,000 = 0.79

2. Operating cash flows to total liabilities = 91,000/450,000 = 0.20

Note: The operating cash flow ratio is cash from operating activities as a percentage of current liabilities in a

given period. This means, it measures company's ability to pay off its short term liabilities.

  

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