How to Calculate Quality of Income

Save
Use your financial statements to evaluate cash flows.
Use your financial statements to evaluate cash flows. (Image: financial report image by PaulPaladin from Fotolia.com)

Quality of income ratios are a tool to evaluate a business' earnings performance. The ratio shows the percentage of earnings that have been actualized in cash. A high ratio is desirable because it indicates a large amount of earnings turning into profits. The percentage may be above 100 percent because the ratio doesn't take into account factors, such as replacement of productive assets.

Find the cash flow from operating activities on your financial statement or statement of cash flows.

Find the net income on your financial statement or statement of cash flows.

Divide the cash flow from operating activities by the net income to calculate a percentage, which is the quality of income figure.

Related Searches

References

Promoted By Zergnet

Comments

You May Also Like

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!