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The cash flows from operations ratio is a type of: a) Investment ratio b) Efficiency ratio c)...

Question:

The cash flows from operations ratio is a type of:

a) Investment ratio

b) Efficiency ratio

c) Gearing ratio

d) Profitability ratio

e) Liquidity ratio

Cash Flow Statement:

Cash flow from the operating activities could be prepared under the direct method or the indirect method. It records the cash generation amount and the sources for such cash generation.

Answer and Explanation:

The correct answer is option (e).

The cash flows from operations ratio is a type of Liquidity ratio.

Explanation: The cash flow from operation is computed to know the availability of the liquid fund which has been generated through the operating activity. Hence, it is considered a liquidity ratio.

The cash flows from operations ratio is not a type of Investment ratio, Efficiency ratio, Gearing ratio, or a Profitability ratio as it does not show the investment, efficiency, profitability or gearing of the amount.


Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
10K

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