The cash flow on total assets ratio reflects actual cash flows and is therefore affected by the accounting constraints of recognition and measurement for net income.

Question

Quizplus · Accepted Answer

The cash flow on total assets ratio, which uses actual cash flows from the operating activities divided by total assets, is not affected by accounting constraints of recognition and measurement that impact net income, as it is based on the actual cash flows rather than accrual accounting measures.

The Cash Flow on Total Assets Ratio Reflects Actual Cash