Cash Flow From Operations

The goal of every company’s normal operations is to generate a profit and generate positive cash flow from one accounting period to the next. Cash flow from operations answers the question of whether regular business operations generates cash from one accounting period to the next. Understanding cash flow from operations is essential with maintaining solvency.

Price to Cash Flow

Price to Cash Flow Ratio

The price to cash flow ratio is a valuation tool used to assist buyers and sellers of stock in determining timing of purchases or the disposition of shares.   Unlike the other valuation ratios, this particular ratio utilizes the cash flows statement in determining the outcome.   The formula is simple:

Price to Cash Flow = $Market Price of a Share of Stock/Cash Flow in Dollars Per Share of Stock

Liquidity Ratios

Liquidity Ratios

Liquidity ratios are a group of ratios used to measure the ability of a business operation to meets its current obligations.   Liquidity ratios are similar to the initial medical tests a patient receives at a doctor’s visit.   Doctors take blood pressure, temperature, and pulse rate.   The doctor wants assurance that the primary indicators of health are good.  Liquidity ratios are exactly the same.  The user wants to know that the basic measurements of a business indicate good health today.

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