Cash Flow Ratios

In Management Accounting, there are 5 ratios which shows the relationship of cash flow and other items of financial statements. In YouTube video, Accounting teacher Susan has explained following 4 cash flow ratio. One cash flow ratio, I have found in Wikipedia's content which has written by Wikipedia's writer. So, I have collected all these for your understanding.

1st Cash Flow Ratio

Cash Flow Yield Ratio

This ratio shows the relationship between cash flow from operations and Net Profit of Company. Cash flow operations is calculated by making cash flow statement and net profit is calculated by making profit and loss account.

Cash Flow Yield Ratio = Cash flow from operations / Net Profits


2nd Cash Flow Ratio

Cash flow to Sales Ratio

This ratio shows the relationship between cash flow from operations and total sales of company.

Cash Flow to Sales Ratio = Cash flow from operations / Sales

3rd Cash Flow Ratio

Cash flow to Assets

This ratio shows the relationship between cash flow from operations and average value of assets of companies. We can calculate average assets by adding opening and closing balance of total assets and after this we divide it by 2.

Cash Flow to Assets Ratio = Cash flow from operations / opening assets + closing assets / 2

4th Cash Flow Ratio

This ratio shows how much money is free after paying dividend and future assets purchasing.

Free Cash Flow Ratio = Cash from operations - dividend paid - ( Purchase value of planned Assets - Sale value of Planned Assets.

5th Cash Flow Ratio

Price to Cash Flow Ratio

This ratio shows the relationship between market price of company's capital and cash flow from operations.

Price to Cash Flow Ratio = Market price of Company's equity share capital / Cash from operations

Wait for next content relating to cash flow ratio analysis in which you will read soon how can these ratios are helpful for manager for managing and budgeting of cash and working capital.


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Accounting Education: Cash Flow Ratios
Cash Flow Ratios
Accounting Education
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