Cash flow ratios and financial performance: A comparative study

Abstract

Cash flow ratios are generally prepared from cash flow statement as per AS-03. It is helpful for financial users including shareholders, management, accountants, auditors and investors to get the relevant information regarding its financial resources for a certain period. Currently cash flow ratios are randomly used instead of traditional ratios due to its wideness and acceptability. In credit rating and forecasting the failure of an organization, cash flow ratios are very much relevant. In this study, we considered different companies from different sectors. From the study, it is clear that the liquidity and solvency position of the companies are moderate whereas the companies maintained low profitability. The efficiency ratios and sufficiency ratios of the companies selected in this study provide us a new look of financial judgement. In our study, we selected three companies from FMCG and Pharmaceuticals sectors. We used the data for a period of 10 years from 2004 to 2013 financial years.

Keywords

• Cash flow ratios
• sufficiency ratios
• efficiency ratios
• profitability
• liquidity