Cash is important, wouldn't you agree? Its important for you and I to go about our lives, and it's equally as important for businesses. This week, we focused on various sources of cash flows and the statement of cash flows. Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction.
There are several financial ratios that are directly associated with the flow of cash in a business. From the list below, choose two ratios and discuss the following for each:
- What role does sales (revenue) play with your ratio?
- What role does debt play with your ratio?
- Can this ratio be a distress indicator (Links to an external site.) for a company? How?
Sample Solution