Principles of Financial Accounting · free preview
Cash Flow Ratios for Liquidity and Solvency
The cash flow statement feeds ratios that measure liquidity and solvency in cash terms, including operating cash flow to current liabilities, cash return on assets, and cash flow to debt, tests that profit-based ratios can fail.
1. Why cash ratios complement accrual ratios
Why cash ratios complement accrual ratios
2. Operating cash flow to current liabilities
Operating cash flow to current liabilities
3. Cash return on assets
Cash return on assets
4. Cash flow to debt and interest coverage in cash
Cash flow to debt and interest coverage in cash
5. Cash ratio advantage
What do cash flow ratios measure that accrual ratios cannot?
6. Cash flow liquidity computation
Operating cash flow is 142,000 dollars and current liabilities are 180,000 dollars. Compute the ratio rounded to two decimals.
7. Cash return reading
A company's accrual return on assets is 12 percent while its cash return on assets is 4 percent. What is the most common interpretation?
8. Cash flow to debt horizon
Operating cash flow is 142,000 dollars and total liabilities are 710,000 dollars. Compute the ratio and the implied debt retirement horizon.
9. Cash flow liquidity inputs
The cash flow liquidity ratio divides operating ____ flow by current liabilities. One word.
10. Accrual comparison ratio
Cash return on assets compares operating cash flow to average total ____. One word.
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