Abstract

Cash flow ratios are the ratios are calculated using balance sheet, income statement, and the statement of cash flow. The statement of cash flow is used to calculate all of the 28 cash flow ratios. These ratios may be used in financial management. The financial managers can utilize the ratios in especially the seven functions of the financial management. They are financial analysis, working capital management, capital structure, capital budgeting, dividend policy, leverage, and valuation. All of the cash flow ratios could be used financial analysis and working capital management functions of the financial management. 14 ratios in capital structure, 10 ratios in capital budgeting, 8 ratios in dividend policy, 8 ratios in leverage, and a ratio in valuation may be used.

Highlights

  • The Science of financial management uses many tools to explain its coverage

  • This may be explained ratio by ratio as below: 1. Cash Flow Adequacy I: The ratio can be used in financial analysis, working capital management, dividend policy, capital structure, and capital budgeting

  • Cash flow ratios may be utilized as a tool of financial management

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Summary

1.Introduction

The Science of financial management uses many tools to explain its coverage. The analysis of financial statement includes ratio analysis, present value calculation, future value calculation, beta, capital assets pricing model (CAPM), fund flow analysis, break-even point, leverage calculations, net present value, internal rate of return etc. I will introduce another tool for financial management. The cash flow ratios will be introduced and their calculation will be explained. An application of an American international company’s cash flow ratio analysis from its financial statements will be realized. An interpretation of the cash flow ratios, the Case company’s cash flow ratios, and the classification of the ratios by utilization of function of financial management will be determined

Cash Flow Ratio Analysis
17. Cash Acquisition
10 The numerator “cash from sales” was calculated like that
28. Total Debt
Cash Flow Adequacy I
Cash Flow Adequacy II
12. Cash Flow per Share
15 Inventory increase numbers of the denominators were calculated like that
20. Return to Stockholders
Utilization of the Cash Flow Ratios in Financial Management
10. CFFO to Annual Interest Payments
Findings
Conclusion
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