Lee Company has provided the following information: • Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
Lee's earnings quality ratio is closest to:
A)1.18
B)0.85
C)1.76
D)0.74

Question

Quizplus · Accepted Answer

The earnings quality ratio is calculated as cash flow from operating activities divided by net income. For Lee Company, it is $240,000 / $204,000 = 1.18.

Lee Company Has Provided the Following Information: • Cash Flow