Compute the quality of income ratio.
A) 2.57
B) 4.09
C) 16.4
D) 2.13

Question

Quizplus · Accepted Answer

The quality of income ratio is calculated by dividing the cash flow from operating activities by the net income. A higher ratio indicates that a company's net income is of a higher quality, meaning that it comes primarily from cash flow from operating activities rather than from other sources such as one-time gains. The ratio is typically between 1 and 2. A ratio of 2.13 indicates that the company is generating a good amount of cash flow from its operations relative to its net income, which is a positive sign for investors.

Compute the Quality of Income Ratio