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## Balance Sheet \$type=three\$count=6\$author=hide\$comment=hide\$label=hide\$date=hide\$show=home\$s=0

Cash flow to Sale ratio is the relationship between cash from operation and sales. This ratio tells us the capacity of total sale which will convert into cash. Higher rate will be good because it will tell that more will convert into cash.

We know that we can use the only revenue which we get in cash form, otherwise, we have to keep our projects in the pending form. When we calculate the cash flow to sale ratio, we can get idea of our cash revenue out of total sale revenue. Following is the formula of cash flow to sale ratio.

For Example : ABC Ltd. gets \$ 789 from operation out of \$ 1000 total sale. Following is cash flow to sale ratio.

Cash flow to sale ratio = \$ 789/\$ 1000 X 100 = 78.95% . It means out of 100 \$ sale, we will get 78.9 \$ cash. As investor, a person will be interested in this ratio because this ratio will give the idea of efficiency of company. More fastly sale will convert into cash, it will be most efficient company because cash revenue is used for paying expenses and rest for dividend and use for business development.

Related : Cash Flow Ratios

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Accounting Education: Cash Flow to Sale Ratio
Cash Flow to Sale Ratio