3 important cash flow ratios
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Get to know the details about three important ratios you can compute using the cash flow statement of a company.
3 Important Cash Flow Ratios In this video, we’ll take a look at 3 important cash flow ratios. First, we have the operating cash flow ratio. It’s essentially the ratio of the cash flow from operating activities to the current liabilities. This number shows you how well-equipped the company is to pay off its current debts with the cash generated. Next, let’s look at the cash flow margin ratio. It’s calculated as the ratio of the cash flow from operating activities to the sales. It shows how efficient a company is at transforming its operations into cash. Lastly, let’s look at the cash flow coverage ratio. This is the ratio of the cash flow from operating activities to the total debt. It indicates a company’s ability to pay its debts when they become due. So, this brings us to the end of another set of useful ratios. Now, it’s time to enter the world of valuation. Keep up with Smart Money to find out more