final exam- cash flow performance ratios Flashcards
cash flow to revenue definition
operating cash generation per dollar of revenue. of there is an increase, look if cash and sales increase. the higher the better. How much cash is the company generating?
cash flow to revenue equation
CFO/net revenue
cash flow on assets definition
Operating cash generated per dollar of asset investment. If increasing, then assets are becoming more efficient and compare with the ROE ratio
cash flow on assets equation
CFO/total assets
cash flow on equity definition
Operating cash generated per dollar of own investment. Take total equity figure. Compare with ROE ratio
cash flow to income definition
Cash generating ability of operations. Take operating profit from the income statement. This ratio is important because it goes back from the fluctuation of cash. If there is a lot of discrepancy (lower than 1) between the numerator and the denominator, it means there is a liquidity problem = lots of accruals. It indicates the quality of earnings when the ratio is close or bigger than 1 and management and investors will see this as a good thing
cash flow to income equation
CFO/operating Income (ANSWER IS IN TIMES – NOT %)
cash flow per share definition
Operating cash flow on a per-share basis. Compare this with EPS. If EPS went down and this ratio increases, look for an explanation of the boost in cash decide whether to adjust this.
cash flow per share equation
CFO - preferred dividends/no. of common shares outstanding (look at average weighted no. of shares number)