Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

Financial Accounting

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

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Multiple Choice

Which of the following formulas correctly computes the cash flow on total assets ratio for a company's fiscal year 2021?

Net Income \( \div \) Average Total Assets

Cash Flow from Investing Activities \( \div \) Total Assets at Year-End

Cash Flow from Operating Activities \( \div \) Average Total Assets

Net Sales \( \div \) Total Assets at Beginning of Year

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Verified step by step guidance

Step 1: Understand the concept of the cash flow on total assets ratio. This ratio measures how efficiently a company generates cash flow from its operating activities relative to its average total assets during a fiscal year.

Step 2: Identify the correct formula for the cash flow on total assets ratio. The formula is: Cash Flow from Operating Activities divided by Average Total Assets.

Step 3: Break down the components of the formula: (1) Cash Flow from Operating Activities is found in the cash flow statement and represents the cash generated or used by the company's core business operations. (2) Average Total Assets is calculated by taking the sum of the total assets at the beginning and end of the year, then dividing by 2.

Step 4: Compare the given formulas in the problem to the correct formula. The correct formula is 'Cash Flow from Operating Activities divided by Average Total Assets,' which matches the third option provided in the problem.

Step 5: Conclude that the other formulas provided in the problem are incorrect because they either use net income, cash flow from investing activities, or net sales, which are not relevant to the calculation of the cash flow on total assets ratio.