Liquidity

Calculate and Interpret the Operating Cash Flow Ratio

Operating Cash Flow, also called “cash flow from operating activities”, represents the cash generated by a company through business operations. The general formula for operating cash flow is the company revenues less the costs of company operations. Because it accounts for liabilities, receivables, and depreciation, operating cash flow is often seen as a [...]

Calculate the Working Capital Turnover Ratio

The Working Capital Turnover Ratio provides a measure to compare the depletion of working capital to the generation of sales over a specific period of time. The ratio provides investors with a look at how effectively a company is leveraging its working capital to generate sales. High or increasing working capital turnover is generally [...]

The Cash Ratio and Stock Investing (includes calculator)

The Cash Ratio provides an indication of a company’s liquidity by measuring the amount of cash, cash equivalents and investments to cover current liabilities. The measure provides investors with a means of determining how quickly the company could satisfy its outstanding liabilities through the liquidation of its cash assets
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Understand and Calculate the Current Ratio

The Current Ratio, a test of a company’s financial strength, is primarily used as an indication of a company’s ability to pay off its short-term liabilities with its short-term assets- cash, inventory and receivables. The higher the current ratio, the more able the company is to pay these obligations. Lower values in the current ratio [...]

What the Quick Ratio Will Tell You
(includes calculator)

The quick ratio (or “acid test” ratio) provides a measure of a company’s short-term liquidity. A high ratio indicates an ability to meet short-term obligations with the liquid assets available to the company. The quick ratio, therefore, is viewed as an indication of the company’s financial strength. As the quick ratio does not [...]