What is the Sales to Cash Flow Ratio?
The sales to cash flow ratio measures the level of a company's sales against its total cash flow.
How Does the Sales to Cash Flow Ratio Work?
Expressed on a per-share basis, the sales to cash flow ratio is calculated by dividing a company's sales volume per share in a given period by its per-share cash flow.
Higher ratios are preferable as they indicate increasing levels of financial strength.
For instance, if a company generates $1,000 in sales per share in a given period accompanied by a per-share cash flow of $250, its sales to cash flow ratio would be 4 ($1000 in sales / $250 cash flow = 4).
Why Does the Sales to Cash Flow Ratio Matter?
Unlike many metrics used for measuring financial strength, the sales to cash flow ratio accounts for the company's output (sales) as the principle mechanism for inbound cash flow.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
The inclination in most homes is to push both spouses into the workforce to generate as much income as...
Read More →
Tired of dragging credit card debt around with you? Then do a balance transfer to transfer debt from a high-interest credit card to one with a lower interest rate. This hack could save...
Read More →
You probably should have read this article before you took your first job out of college. And you definitely should have read it before you walked into your company's HR office and signed on the...
Read More →
Few investors have an unlimited supply of money to keep buying new...
Read More →
Let me tell you, if you are a contrarian investor and looking for a place to hunt for bargains, this is it. Are you familiar with the S&P/TSX Venture Composite Index? Standard and...
Read More →
