The cash flow adequacy ratio can only be calculated if a company uses the direct method to report cash flows from operating activities.

Question

Quizplus · Accepted Answer

The cash flow adequacy ratio can be calculated regardless of whether a company uses the direct or indirect method to report cash flows from operating activities. The ratio compares a company's operating cash flows to its capital expenditures, and is a measure of a company's ability to fund its operations and investments from its own resources.

The Cash Flow Adequacy Ratio Can Only Be Calculated If