Q. What do you mean by Cash Flow Ratios?

Cash Flow Ratios: - Cash Flow Ratios are an additional device of cash management. Some important cash flow ratios are:

(i) Cash Turnover Ratio:-

Cash Turnover Ratio = Sales Per Period / Cash Balance

Higher cash turnover ratio point out that a given level of sales and cash balance requirement is less.

(ii) Cash Coverage Ratio:-

Cash Coverage Ratio = Annual Cash Flow before Interest and Taxes/ (Interest + Principal Payments (1/1-tax rate))

Higher the cash exposure ratio higher will be the credit worthiness of the firm for the reason that the lender' risk will be lower in such a case.

(iii)Cash to average Daily Purchase Ratio:-

Cash to Average Daily Purchase Ratio = Cash Balance /Average Daily Purchase

Average Daily Purchase = Purchases during the period/ Days during the period

(iv) Days of Cash Available:

Days of Cash Available = Average Cash Balance/Average Daily Outflows

(v) Cash Break-Even Point:

Cash Break-Even Point = Cash Fixed Costs/Contribution Per Unit

Contribution Per Unit = Selling price per unit - Variable Cost Per Unit.