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
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
Related Articles
  1. Investing

    Corporate Cash Flow: Understanding the Essentials

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself. Learn how to read the cash flow statement.
  2. Investing

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  3. Small Business

    Understanding Cash Flow

    Learn about the different types of cash flows and the importance for businesses to properly manage their cash flows.
  4. Investing

    Analyzing the Price-to-Cash-Flow Ratio

    Find out how analyzing the price-to-cash-flow ratio can help you make batter investment decisions.
  5. Personal Finance

    10 Ways to Improve Cash Flow in Construction

    Here's how improving cash flow in construction requires some sector-specific strategies.
  6. Investing

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  7. Investing

    10 Ways to Loosen Up Your Cash Flow

    Cash flow is crucial for any business. Here are ten tips to increase your cash flow and keep your business profitable.
Trading Center