Some cash flow ratios are derived by substituting net cash flows from operating activities in place of:
A)average total assets.
B)net income.
C)average stockholders' equity.

Question

Quizplus · Accepted Answer

Cash flow ratios reflect a company's ability to generate cash flows from its operating activities. Therefore, it is more relevant to use net cash flows from operating activities as a substitute for net income when calculating cash flow ratios. Average total assets and average stockholders' equity are used to calculate asset turnover and return on equity ratios, respectively.

Some Cash Flow Ratios Are Derived by Substituting Net Cash