Cash Flow Ratios Analysis & Formula

Cash Flow Ratios are used to assess the cash position of the business. Following are the main cash flow-based financial ratios and the calculations:

Formula:
1) Cash Flow to Assets Ratio = Cash flow from operations / Opening assets + Closing assets / 2
2) Price to Cash Flow Ratio = Market price per share / Cash flow per Share
3) Free Cash Flow Ratio = Cash from operations - dividends paid - (Purchase value of planned assets - Sale value of planned assets)
4) Cash Flow to Sales Ratio = Operating Cash Flow / Net Sales
5) Cash Flow Yield Ratio = Cash flow from operations / Net Profits
6) Operating Cash Flow Ratio = Cash flow / Current liabilities

Learn how to calculate and analyze cash flow ratios with the following examples:

Example 1:
PPP Company has total cash flow of $25 million and the current liabilities are $28 million. Then, the operating cash flow ratio would be: 25 million / 28 million = 0.89. This means that the company is not making enough money to pay its bills and other short term liabilities.

Example 2:
Golden Ltd has the following information for the year ended 31 December 2010: Net Cash Provided by Operating Activities $800,000; Sales $5,100,000; Sales returns $100,000.
Then,
Net sales = 5,100,000 - 100,000 = $5,000,000
Cash Flow to Sales = 800,000 / 5,000,000 = 0.16
This means that cash generated for each dollar of sales is $0.16

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Operating Cash Flow Per Share

Free Cash Flow Formula & Example

Price/Earnings To Growth (PEG) Ratio