The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash flow from operating activities by:
A) Current liabilities at the end of the period
B) Current liabilities at the beginning of the period
C) Total liabilities at the middle of the period
D) Average current liabilities for the period
E) None of the above

Question

Quizplus · Accepted Answer

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's net cash flow from operating activities by the average current liabilities for the period. This approach provides a more accurate reflection of the firm's ability to cover its short-term obligations with cash generated from operations, accounting for any fluctuations in current liabilities throughout the period.

The Operating-Cash-Flow-To-Current-Liabilities Ratio Is Computed by Dividing a Firm's a Net