Question

In 700+ words write a term paper on specialized cash flow ratios

Note: Write in your own words. Plagiarism should not exceed 20%

Answer 1

The cash flow coverage ratio measures the solvency of a company. Cash flow from operations is taken from the statement of cash flows. Total debt is total liabilities, both short and long term. This ratio demonstrates the ability of the company to use its operating cash flows to pay off its debt.

The price to cash flow ratio is an appraisal of a company's share price to its cash flow. This ratio is generally accepted as being more reliable than the price per earnings ratio, as it is harder for false internal adjustments to be made.

Sometimes called the current cash debt ratio, this is a measurement of cash from operating activities to average current liabilities. This ratio demonstrates the ability for operations to generate cash that can be used to cover debts that need to be paid within a years' time.

The cash flow margin ratio is a key ratio for business owners and managers as it expresses the relationship between cash generated from operations and sales.

This ratio is specific in that it indicates the amount of cash generated per dollar of net sales

The cash flow coverage ratio masures the solvency of a company. This is the ability to pay long-term debts.

Cash flow from operations is taken from the statement of cash flows. Total debt is total liabilities, both short and long term. This ratio demonstrates the ability of the company to use its operating cash flows to pay off its debt.

The four ratios discussed are methods behind determining a firm's financial viability. Viability is the ability for a firm to continue generating income to meet all of its financial obligations while allowing for growth at the same time. Combined, these ratios communicate the effectiveness of a business' operations and demonstrate solvency (paying off long-term debts) and liquidity (paying off short-term debts).