The Mitchell Electric Company had net income of $750,000, cash flow from financing activities of $150,000, a depreciation expense of $50,000, and cash flow from operating activities of $575,000.
a. Calculate the firm's quality of earnings ratio. What does this ratio tell you?
b. Mitchell reported the following in its annual reports for 2014-2016:

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

Transcribed Image Text:

(S millions) Cash flow from$478 operations Capital expendi- $459 tures (CAPEX) 2014 2015 $403 2016 $470 $447 $456