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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Ratio Analysis Following are totals from selected financial statements of Magdalene Corporation for the years ended December 31, 2019 and 2020:

Chapter 21, Problem 1E, Ratio Analysis Following are totals from selected financial statements of Magdalene Corporation for

Required:

  1. 1. Next Level Calculate the operating cash flow ratio for the year ended December 31, 2020. What information does this provide about the company?
  2. 2. Next Level Calculate the operating cash flow to total liabilities ratio for the year ended December 31, 2020. What information does this provide about the company?

1.

To determine

Determine the cash flow ratio of company M for the year ended December 31, 2020 and ascertain the information it provided about the company.

Explanation

Operating activities: Operating activities include cash inflows and outflows from business operations.

Operating cash flow ratio: Operating cash flow ratio provides a measure of resources generated over a period of time, which a company capable to meet their current liabilities. Use the following formula to find the operating cash flow ratio.

Operating cash flow ratio = Cash from operating activitiesAverage current liabilities 

Find out operating cash flow ratio:

Operating cash flow ratio = $82,000$104,000(Working note1)=$0

2.

To determine

Dtermine the cash flow to total liabilities ratio of company M for the year ended December 31, 2020 and ascertain the information provided about the company.

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