Below are trends in operating cash flows for three companies.
Company 1
Year1 100,000
Year2 150,000
Year3 50,000
Total 300,000
Company 2
Y1 100,000
Y2 100,000
Y3 100,000
T 300,000
Company 3
Y1 90,000
Y2 100,000
Y3 110,000
T 300,000
Based on an analysis of operating risk, which company's management is likely motivated to have the largest ratio of cash to noncash assets?
A) Company 1.
B) Company 2.
C) Company 3.
D) All companies are expected to have the same ratio.
Answer: Company 1.
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.