Cash Flow Indicator Ratios
  1. Cash Flow Indicator Ratios: Introduction
  2. Cash Flow Indicator Ratios: Operating Cash Flow/Sales Ratio
  3. Cash Flow Indicator Ratios: Free Cash Flow/Operating Cash Flow Ratio
  4. Cash Flow Indicator Ratios: Cash Flow Coverage Ratios
  5. Cash Flow Indicator Ratios: Dividend Payout Ratio

Cash Flow Indicator Ratios: Introduction

By Richard Loth (Contact | Biography)

This section of the financial ratio tutorial looks at cash flow indicators, which focus on the cash being generated in terms of how much is being generated and the safety net that it provides to the company. These ratios can give users another look at the financial health and performance of a company.

At this point, we all know that profits are very important for a company. However, through the magic of accounting and non-cash-based transactions, companies that appear very profitable can actually be at a financial risk if they are generating little cash from these profits. For example, if a company makes a ton of sales on credit, they will look profitable but haven't actually received cash for the sales, which can hurt their financial health since they have obligations to pay.

The ratios in this section use cash flow compared to other company metrics to determine how much cash they are generating from their sales, the amount of cash they are generating free and clear, and the amount of cash they have to cover obligations. We will look at the operating cash flow/sales ratio, free cash flow/operating cash flow ratio and cash flow coverage ratios.

To find the data used in the examples in this section, please see the Securities and Exchange Commission's website to view the 2005 Annual Statement of Zimmer Holdings.

Cash Flow Indicator Ratios: Operating Cash Flow/Sales Ratio

  1. Cash Flow Indicator Ratios: Introduction
  2. Cash Flow Indicator Ratios: Operating Cash Flow/Sales Ratio
  3. Cash Flow Indicator Ratios: Free Cash Flow/Operating Cash Flow Ratio
  4. Cash Flow Indicator Ratios: Cash Flow Coverage Ratios
  5. Cash Flow Indicator Ratios: Dividend Payout Ratio
RELATED TERMS
  1. Operating Cash Flow Ratio

    A measure of how well current liabilities are covered by the ...
  2. Free Cash Flow To Sales

    A ratio that illustrates the percentage of free cash flow to ...
  3. Sales To Cash Flow Ratio

    A comparison of a company's sales to its cash flow. The sales ...
  4. Price to Free Cash Flow

    A valuation metric that compares a company's market price to ...
  5. Non-Operating Cash Flows

    Cash flows (inflows and outflows) that are not related to the ...
  6. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
RELATED FAQS
  1. What are some ratios I can use the operating cash flow ratio with?

    Understand the importance of a company's operating cash flow. Learn about some of the financial ratios that use the operating ... Read Answer >>
  2. What is the difference between the operating the operating cash flow ratio and operating ...

    Find out more about the operating cash flow ratio, the operating cash flow margin, how to calculate these ratios and the ... Read Answer >>
  3. What's the difference between free cash flow and operating cash flow?

    Learn the difference between free cash flow and operating cash flow. Explore how analysts use earnings and cash flow when ... Read Answer >>
  4. Why do analysts look at operating cash flow?

    Learn how operating cash flow is used to determine financial health. Examine how cash flow is calculated, and what a low ... Read Answer >>
  5. Are taxes calculated in operating cash flow?

    Learn how taxes are involved with the calculations for operating cash flow, and find out about the importance of operational ... Read Answer >>
  6. What does the operating cash flow ratio measure?

    Learn about the operating cash flow ratio, how the ratio is calculated and what it indicates about a company. Read Answer >>

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