Topic 3.02-3.04 Review

Formula for price-to-cash flow ratio

• Price-to-cash flow ratio=Free cash flow-cash flow from operations

• Price-to-cash flow ratio=current stock price/cash flow per share

• Price-to-cash flow ratio=Past stock price/cash flow for all shares

• Does not have a set formula

Free cash flow formula

• Free cash flow=cash flow from operations-capital expenditures

• Has no set formula

• Free cash flow=Capital expenditures+Cash flow from operations

• Free cash flow=price to cash flow ratio-current stock price

(FCF) stands for...

• Fat Cash Flow

• Fluid Cash Flow

• Fixed Cash Flow

• Free Cash Flow

What is NOT true about what cash flow ratios (relative to industry and sector) can indicate about the value of a stock?

• Higher numbers may mean the market has overvalued the stock

• Lower numbers may mean the market has overvalued the stock

• Medium numbers for all stocks that have failed

What is liquidity?

• Liquidity is a business's ability to convert liabilities to assets

• Liquidity is a business's ability to convert assets to cash

• Liquidity indicates whether a business is able to pay its bills based on the time of the year

What is NOT one of the measurements that can be used to determine their financial strength and liquidity?

• Sales Ratio

• Working Capital

• Debt to Equity Ratio

• Current Ratio

Working Capital Formula

• Working Capital=Current Liabilities-Current Assets

• Working Capital=Current Assets-Current Liabilities

• Working Capital=Current Assets*Current Liabilities

• Working Capital=Current cash-Current Assets

What is this companies Working Capital?

Current Assets=149,000

Current Liabilities=47,000

• 149,000

• 47,000

• 102,000

• -102,000

What are the components of the Current Ratio formula? (more than 1 answer)

• Current Assets

• Accounts Receivable

• Current Liabilities

• Current Ratio

What ratio is not an acceptable current ratio example?

• 1:1

• 1:2

• 2:1

• 3:1