A Company Reported Average Total Assets of $496,000 in Year

question 97

Essay

A company reported average total assets of $496,000 in Year 1 and $604,000 in Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

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Definitions:

Fixed Cost

This is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Diminishing Returns

An economic principle stating that adding an additional factor of production results in smaller increases in output after a certain point.

Marginal Output

The additional quantity of output that is produced by using one more unit of a given input.

Negative Returns

Occurs when a company or investment loses more money than it earns or when costs exceed revenues.