Cash Flow Ratios
#cashflow-statement #ratios
The cash flow statement may also be used in financial ratios measuring a company's profitability, performance, and financial strength.
Performance Ratios
- Cash flow to revenue = CFO / Net revenue: cash generated per dollar of revenue.
- Cash return on assets = CFO / Average total assets: cash generated from all resources.
- Cash return on equity = CFO / average shareholders' equity: cash generated from owner resources.
- Cash to income = CFO / Operating income: cash-generating ability of operations.
- Cash flow per share = (CFO - Preferred dividends) / number of common shares outstanding: operating cash flow on a per-share basis.
Coverage Ratios
- Debt coverage = CFO / Total debt: financial risk and financial leverage.
- Interest coverage = (CFO + Interest Paid + Taxes paid) / Interest paid: ability to meet interest obligations.
- Reinvestment = CFO / Cash paid for long-term assets: ability to acquire assets with operating cash flows.
- Debt payment = CFO / Cash paid for long-term debt repayment: ability to pay debt with operating cash flows.
- Dividend payment: CFO / Dividends paid: ability to pay dividends with operating cash flows.
- Investing and financing: CFO / Cash outflows for investing and financing activities: ability to acquire assets, pay debts, and make distributions to owners.
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Open it calculated from CFO.
FCFE = CFO + Net borrowing - FCInv
This is different from the formula given in the textbook since net debt repayment should be included in net borrowing!
<span>Cash Flow Ratios
The cash flow statement may also be used in financial ratios measuring a company's profitability, performance, and financial strength.
Performance Ratios
Cash flow to revenue = CFO / Net revenue: cash generated per dollar of revenue. Cash return on assets = CFO / Average total assets: cash generated from all resources. Cash return on equity = CFO / average shareholders' equity: cash generated from owner resources. Cash to income = CFO / Operating income: cash-generating ability of operations. Cash flow per share = (CFO - Preferred dividends) / number of common shares outstanding: operating cash flow on a per-share basis.
Coverage Ratios
Debt coverage = CFO / Total debt: financial risk and financial leverage. Interest coverage = (CFO + Interest Paid + Taxes paid) / Interest paid: ability to meet interest obligations. Reinvestment = CFO / Cash paid for long-term assets: ability to acquire assets with operating cash flows. Debt payment = CFO / Cash paid for long-term debt repayment: ability to pay debt with operating cash flows. Dividend payment: CFO / Dividends paid: ability to pay dividends with operating cash flows. Investing and financing: CFO / Cash outflows for investing and financing activities: ability to acquire assets, pay debts, and make distributions to owners.<span><body><html>Original toplevel document
Subject 3. Cash Flow Statement Analysision
FCFF = CFO + Int (1 - tax rate) - Investment in fixed capital = 250 + 50 (1 - 0.3) - 240 = $45 million
As CFO is given, information on WCInv and non-cash charges is not required.
<span>Free Cash Flow to Equity (FCFE): Cash available to stockholders after payments to and inflows from bondholders. This is the cash flow from operations net of capital expenditures and debt payments (including both interest and repayment of principal).
FCFE = FCFF + Net borrowing - Int ( 1- Tax rate)
FCFE can be calculated from net income. Recall that FCFF = NI + NCC + Int (1 - Tax rate) - FCInv - WCInv. Then:
FCFE = NI + NCC + Net borrowing - FCInv - WCInv
FCFE can be calculated from CFO.
FCFE = CFO + Net borrowing - FCInv
This is different from the formula given in the textbook since net debt repayment should be included in net borrowing!
Cash Flow Ratios
The cash flow statement may also be used in financial ratios measuring a company's profitability, performance, and financial strength.
Performance Ratios
Cash flow to revenue = CFO / Net revenue: cash generated per dollar of revenue. Cash return on assets = CFO / Average total assets: cash generated from all resources. Cash return on equity = CFO / average shareholders' equity: cash generated from owner resources. Cash to income = CFO / Operating income: cash-generating ability of operations. Cash flow per share = (CFO - Preferred dividends) / number of common shares outstanding: operating cash flow on a per-share basis.
Coverage Ratios
Debt coverage = CFO / Total debt: financial risk and financial leverage. Interest coverage = (CFO + Interest Paid + Taxes paid) / Interest paid: ability to meet interest obligations. Reinvestment = CFO / Cash paid for long-term assets: ability to acquire assets with operating cash flows. Debt payment = CFO / Cash paid for long-term debt repayment: ability to pay debt with operating cash flows. Dividend payment: CFO / Dividends paid: ability to pay dividends with operating cash flows. Investing and financing: CFO / Cash outflows for investing and financing activities: ability to acquire assets, pay debts, and make distributions to owners.
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