Lesson 4 of 5 · 12 min
Cash flow performance ratios
Performance ratios put CFO over revenue, assets, equity, operating income or shares to show how much operating cash a company squeezes out of each unit of sales or investment.
In short
- Cash flow ratios fall into performance (profitability) ratios and coverage (solvency) ratios.
- Cash flow to revenue = CFO ÷ net revenue: operating cash per unit of revenue.
- Cash return on assets = CFO ÷ average total assets; cash return on equity = CFO ÷ average shareholders' equity.
- Cash to income = CFO ÷ operating income: the cash-generating ability of operations.
- Cash flow per share = (CFO − preferred dividends) ÷ common shares outstanding. Under IFRS, add back total dividends paid if they sit in operating, then subtract preferred dividends.
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