Open AccessOperating Cash Flow Ratios Measure A Retail Firms Ability To Pay
Author(s) -
Thomas L. Zeller,
Brian B. Stanko
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v10i4.5907
Subject(s) - cash flow statement , cash flow , operating cash flow , cash flow forecasting , financial ratio , business , accounting , accrual , financial statement , cash and cash equivalents , financial analysis , finance , cash management , audit , earnings
Analysts derive a broad array of financial ratios from published financial reports to assess business enterprise performance. Only a few, however, may be necessary for meaningful insight. This study explores whether operating cash flow ratios provide unique or redundant insight in financial ratio analysis of retail firms. Adoption of Financial Accounting Standard #95, The Statement of Cash Flows, by the Financial Accounting Standards Board in 1987 provides the impetus for the ongoing interest in cash flow ratios. We find that operating cash flow ratios provide unique insight, relative to traditional accrual-based financial ratios, regarding a retail firms ability to pay. Therefore, financial ratio analysis of a retail firm should include cash flow ratios for predictive, explanatory or descriptive purposes.