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19 October, 18:08

A company reports the amounts below in its statement of cash flows.

Net cash flow from investing activities $ 66,480

Net cash flow from financing activities $ 30,780

Total net cash flow $123,000

Current liabilities beginning of year $ 19,500

Current liabilities end of year $ 23,400

What is the company's operating cash flows to current liabilities ratio?

A. 1.19

B. 1.30

C. 1.20

D. 6.21

E. None of the above

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  1. 19 October, 21:52
    0
    C. 1.20

    Explanation:

    The total net cash flow consist of net cash flows from 3 activities namely; Operating activities, Investing activities and Financing activities.

    Let the cash flows from operating activities be y

    Therefore,

    123,000 = y + 66,480 + 30,780

    y = 123,000 - 66,480 - 30,780

    y = 25,740

    Current liabilities = (23,400 + 19,500) / 2

    = 21450

    The company's operating cash flows to current liabilities ratio

    = 25,740 / 21450

    = 1.20
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