Impact of the Fall of Silicon Valley Bank
The Silicon Valley Bank collapse has the potential to be a turning point in the way the modern financial system functions. It is being touted as an event that is likely to have large-scale repercussions on the entire financial system. It is alleged that the Silicon Valley Bank is definitely going to have an impact […]
How Do Pension Funds Influence Economic Growth?
Pension funds have witnessed a dramatic increase in the number of assets that they control. This increase has been the result of an ever-increasing workforce that has been diligently contributing to their financial future. The funds being managed by pension funds have increased both in developed as well as developing nations. Many developing nations are […]
BB&T and Sun Trust Bank Merger
BB&T and Sun Trust bank are both giant institutions in their own right. However, now since they have decided to merge, another “mega-bank” is likely to come into existence in America. Both these banks have been in operation for over 100 years, hence have their own heritage. Financial analysts are not clear on whether the […]
Leasing in Infrastructure Finance
In the previous article, we have studied about how vendor financing is being used as an alternate mechanism of finance in the infrastructure financing community. Similarly, leasing is also being used as a method of raising finances for infrastructure projects. Leasing is primarily used because this method allows conserving capital as well as provides many […]
Venture Debt in Startup Funding
Whenever the subject of startup funding is mentioned, the audience automatically assumes that equity investments are being discussed. This is because it is the big equity deals that are mentioned in the newspapers which catch the attention of the world. However, equity funding is not the only way in which startup founders can raise capital. […]
The formula for this ratio can be easily judged by its name:
Operating Cash Flow to Sales Ratio = Operating Cash Flow / Sales
Sometimes companies do fake transactions to ensure that sales numbers look good to the stock market. However, the acid test comes when sales need to be converted to cash. Only genuine sales bring in cash flow. Thus analysts can make more accurate prediction of the future years cash flows and therefore value the stock more accurately.
For instance if 90 days receivables are outstanding, it means on an average the company extends credit for (90/360), 25% of its sales at any given point of time. Thus in this case the operating cash flow to sales ratio must be 75% or close. This makes the analysts more sure that the financial statements of the firm are indeed genuine.
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