Cash Ratio

“Cash is king” still holds. But how do you use cash to analyze your company’s financial health? Consider these seven ratios:

1️⃣          Cash Ratio
The ratio compares a company's cash and cash equivalents to its current liabilities. It shows the company's ability to pay off its short-term debts using only its cash reserves.

2️⃣          Operating Cash Flow Ratio
It’s operating cash flow compared to current liabilities. It shows the company's ability to pay off its current liabilities using its operating cash flow.

3️⃣          Free Cash Flow to Sales Ratio
This ratio compares a company's free cash flow to its revenue. It shows how much cash a company generates from its revenue after deducting all capital expenditures.

4️⃣          Price to Cash Flow Ratio
A company's stock price is compared to its operating cash flow per share. It shows how much investors are willing to pay for each dollar of operating cash flow.

5️⃣          Cash Flow Return on Investment (CFROI)
The metric measures the return on investment generated by a company's cash flow. It compares the present value of a company's cash flows to the amount of invested capital.

6️⃣          Debt to Operating Cash Flow Ratio
A company's total debt compared to its operating cash flow. It shows how many years it would take for a company to pay off its debt using its operating cash flow.

7️⃣          Cash Flow Margin
Operating cash flow compared to revenue. It shows how much of each dollar of revenue is converted into cash flow.

These ratios can provide valuable insights into a company's cash flow management and financial health.  However, it's important to consider them alongside other financial metrics and factors, such as industry trends and market conditions, to get a more complete picture of a company's performance.