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

Test your knowledge using the equation and check your answer with the calculator above.

QER = NCO / NI = ?