(Analyzing the quality of firm earnings)Kabutell, Inc. had net income of

$750,000,

cash flow from financing activities of

$80,000,

depreciation expenses of

$80,000,

and cash flow from operating activities of

$500,000.

a.Calculate the quality of earnings ratio. What does this ratio tell you?

b.Kabutell, Inc. reported the following in its annual reports for

2011-2013:

($ million)	2011	2012	2013
Cash Flow from Operations	$479	$404	$469
Capital Expenditures (CAPEX)	$460	$449	$455

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spreadsheet.)

Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results?

Question content area bottom

Part 1

a.What is Kabutell's quality of earnings ratio?

What does this ratio tell you?(Select the best choice below.)

A.

Kabutell's reported net income was

66.7

percent of the firm's cash flow from operations. The firm depends mainly on non-operating source of cash to generate its net income.

B.

Kabutell's reported net income was

66.7

percent of the firm's cash flow from operations. The firm depends mainly on operating source of cash to generate its net income.

C.

Kabutell's cash flow from operations was

66.7

percent of the firm's reported net income. The firm depends mainly on operating source of cash to generate its net income.

D.

Kabutell's cash flow from operations was

66.7

percent of the firm's reported net income. The firm depends mainly on non-operating source of cash to generate its net income