Cash Flow Indicator Ratios
AAA
  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. Earned Premium

    The amount of total premiums collected by an insurance company ...
  2. Insurance Regulatory Information System (IRIS)

    A collection of databases and tools used to analyze the financial ...
  3. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  4. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  5. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  6. Derived Investment Value (DIV)

    A valuation methodology used to calculate the present value of ...
  1. Are accounts payable an expense?

    Learn about how to differentiate between liability accounts and expense accounts, and see why accounts payable is considered ...
  2. Are accounts payable an asset?

    Find out why the general ledger accounts payable is considered to be a current liability, not a current asset, and how it ...
  3. Are accounts payable counted as revenue?

    See how accounts payable is treated on the balance sheet, and why it is considered an expense and liability rather than revenue ...
  4. What is the relationship between minority interest discount and fair market value?

    Learn how to determine the fair market value and minority interest discount for the sale of a share of a closely held corporation.

You May Also Like

Related Tutorials
  1. Investing Basics

    Industry Handbook

  2. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  3. Fundamental Analysis

    Discounted Cash Flow Analysis

  4. Fundamental Analysis

    Ratio Analysis Tutorial

  5. Economics

    American Depositary Receipt Basics

Trading Center