Julio Company wants to know if its liquidity performance has improved. Calculate the company's cash return on assets for 20x8 and 20x7 using the following data:
Net cash flows from operating activities, 20x7 ................................ $ 4,300
Net cash flows from operating activities, 20x8 ................................ 5,000
Total assets, 20x6 .................................................................. 36,000
Total assets, 20x7 .................................................................. 40,000
Total assets, 20x8 .................................................................. 46,000
By this measure has liquidity improved? Why is it important to use average total assets in the calculation?