Cash Flow Efficiency(PartB)

In Part A, we have looked at Cash sufficiency Financial ratio, let’s look at another cash flow ratio namely CASH FLOW EFFICIENCY FINANCIAL RATIO:

Ratios For Cash flow efficiency

(a) Cash flow to sales

Purpose: to measure the ability to convert sales revenue into cash flows.

Formula:

Cash from operations

Net sales revenue

(b) Operation Index

Purpose: an index measuring the relationship between profit from operations and operating cash flows

Formula:

Cash from operations

Operating profit after income tax

(c ) Cash flow return on assets

Purpose: to measure the entity’s operating cash flow return on assets before interest and tax.

Formula:

Cash from operations + Tax Paid + Interest paid

Average total assets

This entry was posted on Wednesday, October 17th, 2007 at 7:43 am and is filed under c. Cash Flows, d. Interpretation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

MBA Accounting