Question

If the free cash flow is $60,000, sales are $200,000, and net income is $100,000, the ratio of free cash flow to sales is a.30%. b.60%. c.The ratio cannot be calculated from this information because cash used to purchase property, plant, and equipment is not given. d.333%.

Answer 1

30%

Step-by-step explanation:

The ratio of free cash flow to sales can be calculated by dividing the free cash flow by the sales amount as follows:

Ratio of free cash flow to sales = $60,000 ÷ $200,000 = 0.30, or 30%.

Therefore, the ratio of free cash flow to sales is 30%.