Cash Flow & Liquidity Ratios
These ratios help you answer one core question: Can this business fund itself, pay its bills, and survive stress? Fiscal Investors care about cash because cash is what keeps companies alive when conditions tighten.
7 Cash Metrics Every Fiscal Investor Should Know
Use these to compare a company to its own history and to peers in the same industry.
1) Cash Ratio
Formula:
Cash Ratio = (Cash + Cash Equivalents) / Current Liabilities
What it tells you: Can the company cover short-term obligations using cash on hand only?
Fiscal Investor lens: Higher = more defensive. Too high for too long can also signal idle cash.
2) Operating Cash Flow Ratio
Formula:
Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities
What it tells you: Can ongoing business operations pay current liabilities without financing tricks?
Fiscal Investor lens: Stronger than many “current ratio” views because it’s based on cash, not accounting items.
3) Free Cash Flow to Sales
Formula:
Free Cash Flow to Sales = Free Cash Flow / Revenue (TTM)
Where:
Free Cash Flow = Operating Cash Flow − Capital Expenditures
Fiscal Investor lens: Shows how “real” revenue is. Strong FCF conversion supports dividends, buybacks, and reinvestment.
4) Price to Cash Flow
Formula:
Price to Cash Flow = Market Price per Share / Operating Cash Flow per Share
Where:
Operating Cash Flow per Share = Operating Cash Flow / Shares Outstanding
Fiscal Investor lens: Helpful when EPS is noisy. Compare to the company’s own history + peers.
5) CFROI
Formula:
CFROI = Present Value of Cash Flows / Invested Capital
What it tells you: How effectively the business turns invested capital into cash-based returns.
Fiscal Investor lens: A “quality” signal—especially when stable across cycles.
6) Debt to Operating Cash Flow
Formula:
Debt to Operating Cash Flow = Total Debt / Operating Cash Flow
What it tells you: How many “years” of operating cash flow it would take to pay down total debt.
Fiscal Investor lens: Lower is generally safer. Watch for deterioration when rates rise or demand slows.
7) Cash Flow Margin
Formula:
Cash Flow Margin = Operating Cash Flow / Revenue
What it tells you: How much of each revenue dollar becomes operating cash.
Fiscal Investor lens: Rising margins can signal operating leverage + pricing power; falling margins can hint at stress.
Bottom line: Fiscal Investors don’t just ask “Is revenue growing?” — they ask “Does the business produce cash, manage debt, and stay resilient under pressure?”