Enter the net cash from operating activities ($) and the net income ($) into the Quality of Earnings Ratio Calculator. The calculator will evaluate and display the Quality of Earnings Ratio.

## Quality of Earnings Ratio Formula

The following formula is used to calculate the Quality of Earnings Ratio.

QER = NCO / NI

• Where QER is the Quality of Earnings Ratio
• NCO is the net cash from operating activities ($) • NI is the net income ($)

## How to Calculate Quality of Earnings Ratio?

The following example problems outline how to calculate Quality of Earnings Ratio.

Example Problem #1:

1. First, determine the net cash from operating activities ($). • The net cash from operating activities ($) is given as: 1,600.
2. Next, determine the net income ($). • The net income ($) is provided as: 2,000.
3. Finally, calculate the Quality of Earnings Ratio using the equation above:

QER = NCO / NI

The values given above are inserted into the equation below and the solution is calculated:

QER = 1600 / 2000 = .80

Example Problem #2:

For this problem, the variables required are provided below:

net cash from operating activities ($) = 500,000 net income ($) = 750,000