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All trading basics

Cash Flow to Assets

Cash Flow to Assets = Cash from Operations ÷ Total Assets

This ratio indicates the cash a company can generate in relation to its size.

Things to remember

  • Comparing to previous years is important. If the company's ratio is decreasing then they may eventually run into cash problems.
Balance Sheet
Statement of Cash Flow

For Cory's Tequila Co.: $4,438 ÷ $14,725 = 0.30

Cash Flow to Assets Analysis:

Cash flow is often overlooked when people analyze a company. You can be a profitable company but if you don't have cash moving around to pay bills then you are really in trouble. It relates a company's ability to generate cash compared to its asset size. A ratio of 0.30 (30%) is quite good, Cory's Tequila Co. shouldn't run into any problems generating cash. When the ratio declines below 10% then there may be some cause for concern.