CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows II
A company reports cash flow from operations of EUR 480 million, net revenue of EUR 3,000 million, and average total assets of EUR 4,000 million. The company's cash return on assets is closest to:
Cash return on assets is operating cash flow divided by average total assets: 480 / 4,000 = 12.0%. Using revenue as the denominator gives 16.0%, which is cash flow to revenue and is the wrong ratio for this question.
- A12.0%Correct
- B16.0%
- C25.0%
Explanation
Cash return on assets = CFO / average total assets = 480 / 4,000 = 12.0%. The 16.0% figure results from using revenue as the base (480/3,000), which is cash flow to revenue. The 25.0% figure is unrelated to the data given.
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