Tuesday, August 12, 2014

Cash Flow Indicator Ratios

Series : Ratio Analysis    (20 th Post)


Q How solvent, liquid, and viable the company is ? 

This ratio helps us to understand the Cash being generated how much is generated These ratios can give users another look at the financial health and performance of a company.

Cash inflows usually arise from one of three activities – financing, operations or investing .In accounting using non cash based transactions companies that appear to be profitable are actually at a financial risk if they are generating little cash ,

Example if a company does lots of sales on credit they will look profitable but they are yet to receive the cash from the sale’s. Using this Ratios helps to highlight this Details about a company's performance.

This ratio uses cash flow along with other key metrics to determine how much cash the company is generating from the sales ,the Cash generated is free and clear and ready to meet company's  obligations.

The Cash flow Ratios that will be defined in following posts are

1.Operating Cash Flow/ Sales Ratio
2.Free Cash Flow/ Operating Cash Flow Ratio
3 Cash Flow Coverage Ratio

Next Post on Ratio Analysis:   Cash Flow Indicator Ratios : Operating Cash Flow/Sales Ratio

In my quest for learning value investing I came acrros this interesting article and thought would like to share this with the community
Comments  / Improvements and points worth considering are welcome

Google Feedburner is free & allows to directly deliver any new post  on this blog to your email .If you are interested  kindly enter your Email in the “Subscribe Via Email”   on the top left hand side of the navigation  menu’s.

Related Articles

·          Liquidity Measurement Ratios

Share |


  1. I found your post quite interesting that is helpful in educating the traders about trading.