Sales To Cash Flow Ratio

AAA

DEFINITION of 'Sales To Cash Flow Ratio'

A comparison of a company's sales to its cash flow. The sales to cash flow ratio is expressed on a per-share basis and is calculated by dividing sales per share by the cash flow per share:

Sales to Cash Flow Ratio =


Sales Per Share_____
Cost Flow Per Share


Higher ratios are more favorable and are indicative of positive financial strength within a company. The sales to cash flow ratio is an important metric for measuring financial strength, because it takes into consideration the company's output (sales) as the primary means of inbound cash flow.

INVESTOPEDIA EXPLAINS 'Sales To Cash Flow Ratio'

The two metrics used in the sales to cash flow ratio are sales per share and cash flow per share. Sales per share (also known as revenue per share) is a ratio that computes the total revenue earned per share throughout a 12-month period. It is calculated by dividing total revenue earned (in a fiscal year) by the weighted average of shares outstanding (for the same fiscal year):

Sales Per Share =
Total Revenue/Sales____
Average Shares Outstanding


A company's cash flow per share is another measure of financial strength that is calculated by subtracting preferred dividends from operating cash flow and dividing the difference by common shares outstanding:

Cash Flow Per Share =


(Operating Cash Flow - Preferred Dividends)
Common Shares Outstanding

RELATED TERMS
  1. Cash Conversion Cycle - CCC

    A metric that expresses the length of time, in days, that it ...
  2. Cash Flow Per Share

    A measure of a firm's financial strength, calculated as: Cash ...
  3. Sales Per Share

    A ratio that computes the total revenue earned per share over ...
  4. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  5. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  6. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
RELATED FAQS
  1. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  2. How often should a small business owner go through a bank reconciliation process?

    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
  3. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  4. What is the difference between recurring and non-recurring general and administrative ...

    The difference between recurring and nonrecurring general and administrative expenses can best be understood as the difference ... Read Full Answer >>
  5. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  6. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Investing Basics

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  3. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  4. Forex Education

    6 Basic Financial Ratios And What They Reveal

    These formulas can help you pick better stocks for your portfolio once you learn how to use them.
  5. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  6. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  7. Fundamental Analysis

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  8. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  9. Economics

    Understanding Historical Cost

    Historical cost equals the original purchase price of an asset recorded on a company’s balance sheet.
  10. Economics

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!