Thread by @QCompounding

In the end, Cash Flow is all what matters.

Here are 6 important Cash Flow Ratios:

1️⃣ Cash flow-to-Debt Ratio

• Indicates how long it would take a company to repay its debt if it devoted all of its cash flow to debt repayment.

• Cash Flow-to-Debt = (Total Debt / Cash Flow from Operations)

• Seek for companies with a Cash Flow-to-Debt lower than 3.

2️⃣ Operating Cash Flow Margin Ratio

• Compares a company's operating cash flow to its net revenue over a specified period.

• Operating Cash Flow Margin = (Cash Flow From Operations / Net Revenue)

• Seek for companies with an Operating Cash Flow Margin higher than 10%.

3️⃣Price-to-Cash Flow Ratio

• Indicates how much cash a company generates relative to its stock price.

• Price-to-Cash Flow Ratio = (Market Capitalization / Cash Flow From Operations)

• Seek for companies which trade below their own historical average valuation

4️⃣Free Cash Flow-to-Sales Ratio

• Indicates how much cash a company generates relative to its sales

• Free Cash Flow-to-Sales = (Free Cash Flow / Net Revenue)

• Seek for companies with a Free Cash Flow-to-Sales higher than 10%.

5️⃣Cash Flow-to-Net Income

• Indicates the amount of cash a business generates per dollar of its income from operating activities.

• CF-to-Net Income = (CF from Operations / Net Income)

• Seek for companies with a CF/Net Income which averaged > 80% over the past 5 years.

6️⃣Current Liability Coverage Ratio

• Can a company still meet its ST liabilities after paying out a dividend?

• Current Liability Coverage Ratio = ((CF from Operations - Dividends) / Current Liabilities)

• Seek for companies with a coverage ratio of minimum 1,5.

Here's an overview of all ratios mentioned:

That's it for today.

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