Cash Flows Statement Ratios

Cash Flows Statement (CFS) ratios are conceptually similar to your income statement ratios, only they show the distribution of Gross Cash Flow rather than Gross Sales. CFS allows to calculate and analyze five useful ratios:

·         Investment in Operating Working Capital / Gross Cash Flow

·         Investment in Capital Assets / Gross Cash Flow (the former includes investment in capitalized operating leases and in intangibles)

·         Gross Investment / Gross Cash Flow

·         Free Cash Flow / Gross Cash Flow

·         Cash Flow Available to Investors / Free Cash Flow (this one in a well-managed company must be equal to 100%)

I have covered the basics of optimizing these items – and, therefore, these ratios in the previous section on Cash Flow Statement (indirect form).