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16.5 Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency

Cash Flow Ratios​

Operating Cash Flow Ratio: Operating Cash Flow Ratio = Cash from Operations ÷ Current Liabilities

Free Cash Flow: Free Cash Flow = Cash from Operations - Capital Expenditures

Cash Flow to Debt: Cash Flow to Debt = Cash from Operations ÷ Total Debt

Luxembourg Considerations​

Ratios Help:

  • Assess liquidity
  • Evaluate solvency
  • Compare performance
  • Make decisions

Luxembourg Compliance Note​

Cash flow ratios in Luxembourg:

  • Useful for analysis
  • Help with decisions
  • Compare to benchmarks
  • Important for stakeholders

Think It Through​

How can cash flow ratios help assess a company's financial health?