Question

Two como in the constructions industry report the following selected and orany Concas $ 40,670 67076 Netcome Operating can to
2-a. Which company has the better cash flow to sales ratio? Company B Company A 2-b. Which company has the better asset turno
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Answer #1
A B
Cash return on assets Cash return on assets
= Operating cash flow / Average total assets = Operating cash flow / Average total assets
=3894 /((33055+31925)/2)*100 =5175 /((40777+41414)/2)*100
11.99 12.59
Cash flow to Sales Cash flow to Sales
= Operating cash flows / Net Sales = Operating cash flows / Net Sales
=3894/46620*100 =5175/67076*100
8.35 7.72
Asset turnover ratio Asset turnover ratio
Sales / Average total assets Sales / Average total assets
=46620 /((33055+31925)/2) =67076 /((40777+41414)/2)
1.43 1.63

2a Company A

2b Company B

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