Cash Flow Ratios

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Cash Flow Ratios

Key elements and framework breakdown

Operating Cash Flow (OCF) Ratio Operating Cash Flow to Sales Ratio (OC… Operating Cash Flow to Net Income Ratio Operating Cash Flow Margin Free Cash Flow (FCF) Ratio Free Cash Flow to Equity (FCFE) Ratio Cash Flow Coverage Ratio Cash Flow Return on Investment (CFROI)…
Key Elements
Operating Cash Flow (OCF) Ratio
Measures the proportion of operating cash flow relative to total cash flow, assessing operational cash generation.
Operating Cash Flow to Sales Ratio (OCFS) Ratio
Compares operating cash flow to total sales revenue, indicating cash generated from sales.
Operating Cash Flow to Net Income Ratio
Measures the proportion of operating cash flow relative to net income, evaluating cash generation efficiency.
Operating Cash Flow Margin
Represents the percentage of operating cash flow relative to total sales revenue, indicating cash profitability.
Free Cash Flow (FCF) Ratio
Measures the proportion of free cash flow relative to total cash flow, assessing cash available for other purposes.
Free Cash Flow to Equity (FCFE) Ratio
Compares free cash flow to shareholders' equity, indicating cash available to shareholders after expenses.
Cash Flow Coverage Ratio
Measures the ability to cover interest expenses with operating cash flow, evaluating debt servicing capacity.
Cash Flow Return on Investment (CFROI) Ratio
Represents the return on investment as a percentage of cash flow, indicating the profitability of investments.
businessengineer.ai · Updated 2025
Cash Flow RatioDescriptionWhen to UseExampleFormula
Operating Cash Flow (OCF) RatioMeasures the proportion of operating cash flow relative to total cash flow, assessing operational cash generation.Assess the proportion of operating cash within total cash flow.An OCF ratio of 0.8 indicates that 80% of cash flow comes from operations.OCF Ratio = Operating Cash Flow / Total Cash Flow
Operating Cash Flow to Sales Ratio (OCFS) RatioCompares operating cash flow to total sales revenue, indicating cash generated from sales.Assess the efficiency of cash generation from sales.An OCFS ratio of 0.2 means 20% of sales revenue is converted into cash.OCFS Ratio = Operating Cash Flow / Total Sales
Operating Cash Flow to Net Income RatioMeasures the proportion of operating cash flow relative to net income, evaluating cash generation efficiency.Assess how efficiently net income is converted into cash.An operating cash flow to net income ratio of 1 indicates net income equals operating cash flow.Operating Cash Flow to Net Income Ratio = Operating Cash Flow / Net Income
Operating Cash Flow MarginRepresents the percentage of operating cash flow relative to total sales revenue, indicating cash profitability.Assess the profitability of cash generated from operations.An operating cash flow margin of 15% means 15% of sales revenue is operating cash flow.Operating Cash Flow Margin = (Operating Cash Flow / Total Sales) * 100%
Free Cash Flow (FCF) RatioMeasures the proportion of free cash flow relative to total cash flow, assessing cash available for other purposes.Evaluate the proportion of cash flow available for investments or debt reduction.An FCF ratio of 0.4 indicates that 40% of cash flow is available as free cash flow.FCF Ratio = Free Cash Flow / Total Cash Flow
Free Cash Flow to Equity (FCFE) RatioCompares free cash flow to shareholders’ equity, indicating cash available to shareholders after expenses.Assess the cash available to shareholders for potential dividends or investments.An FCFE ratio of 0.15 suggests 15% of shareholders’ equity is available as free cash flow.FCFE Ratio = Free Cash Flow / Shareholders’ Equity
Cash Flow Coverage RatioMeasures the ability to cover interest expenses with operating cash flow, evaluating debt servicing capacity.Assess the ability to meet interest payments from cash flow.A cash flow coverage ratio of 3 indicates cash flow covers interest expenses three times.Cash Flow Coverage Ratio = Operating Cash Flow / Interest Expenses
Cash Flow Return on Investment (CFROI) RatioRepresents the return on investment as a percentage of cash flow, indicating the profitability of investments.Assess the return on investments relative to cash flow.A CFROI ratio of 0.12 means a 12% return on investment relative to cash flow.CFROI Ratio = Net Cash Flow from Investments / Average Cash Flow
Cash Flow to Capital Expenditures (CapEx) RatioCompares cash flow to capital expenditures, indicating the ability to fund investments from cash flow.Evaluate the ability to finance capital expenditures using cash flow.A CapEx ratio of 1 means capital expenditures are fully covered by cash flow.CapEx Ratio = Operating Cash Flow / Capital Expenditures
Cash Flow to Current Liabilities RatioMeasures the ability to cover current liabilities with operating cash flow, assessing liquidity.Assess the ability to meet short-term obligations using cash flow.A cash flow to current liabilities ratio of 1.5 suggests strong liquidity.Cash Flow to Current Liabilities Ratio = Operating Cash Flow / Current Liabilities
Cash Flow to Long-Term Debt RatioCompares cash flow to long-term debt, evaluating the capacity to service long-term debt obligations.Assess the ability to meet long-term debt payments from cash flow.A cash flow to long-term debt ratio of 2 indicates cash flow covers debt obligations twice.Cash Flow to Long-Term Debt Ratio = Operating Cash Flow / Long-Term Debt
Cash Flow Adequacy RatioRepresents the proportion of cash flow available to meet both current liabilities and long-term debt.Assess the overall ability to cover all liabilities using cash flow.A cash flow adequacy ratio of 1.2 indicates sufficient cash flow to cover all liabilities and have some surplus.Cash Flow Adequacy Ratio = Operating Cash Flow / (Current Liabilities + Long-Term Debt)
Cash Flow to Total Debt RatioCompares cash flow to total debt, indicating the capacity to service all debt obligations.Evaluate the ability to meet all debt payments from cash flow.A cash flow to total debt ratio of 0.8 suggests cash flow covers 80% of total debt obligations.Cash Flow to Total Debt Ratio = Operating Cash Flow / Total Debt
Cash Flow to Interest Expense RatioMeasures the ability to cover interest expenses with operating cash flow.Assess the ability to meet interest payments from cash flow.A cash flow to interest expense ratio of 4 indicates cash flow covers interest expenses four times.Cash Flow to Interest Expense Ratio = Operating Cash Flow / Interest Expenses
Cash Flow to Sales RatioCompares cash flow to total sales revenue, indicating cash generation efficiency from sales.Assess the efficiency of cash generation relative to sales.A cash flow to sales ratio of 0.2 means 20% of sales revenue is converted into cash flow.Cash Flow to Sales Ratio = Operating Cash Flow / Total Sales
Cash Flow to Total Assets RatioMeasures the proportion of cash flow relative to total assets, assessing efficiency in generating cash.Evaluate the efficiency of cash generation relative to total assets.A cash flow to total assets ratio of 0.1 suggests 10% of total assets are generated as cash flow.Cash Flow to Total Assets Ratio = Operating Cash Flow / Total Assets
Cash Flow to Working Capital RatioCompares cash flow to working capital, indicating liquidity and ability to meet short-term obligations.Assess the ability to meet short-term obligations using cash flow.A cash flow to working capital ratio of 1.5 suggests strong liquidity.Cash Flow to Working Capital Ratio = Operating Cash Flow / Working Capital
Cash Flow to Equity RatioMeasures the proportion of cash flow relative to shareholders’ equity, evaluating cash returns to equity holders.Assess the cash returns available to shareholders.A cash flow to equity ratio of 0.15 suggests 15% of shareholders’ equity is available as cash flow.Cash Flow to Equity Ratio = Operating Cash Flow / Shareholders’ Equity
Cash Flow to Earnings RatioCompares cash flow to earnings, indicating the efficiency of converting earnings into cash.Assess how efficiently earnings are converted into cash.A cash flow to earnings ratio of 1 suggests that earnings equal cash flow.Cash Flow to Earnings Ratio = Operating Cash Flow / Earnings per Share
The Enlightened Accountant by Gennaro Cuofano – FourWeekMBADownload

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