The Role of the Finance Function in Organizational Processes
The Finance Function and the Project Office Contemporary organizations need to practice cost control if they are to survive the recessionary times. Given the fact that many top tier companies are currently mired in low growth and less activity situations, it is imperative that they control their costs as much as possible. This can happen […]
Was The Silicon Valley Bank Bailed Out by the Government?
The current crisis at the Silicon Valley Bank is a stark reminder of the dark days of 2008. Just like now, the entire banking system was in complete disarray. However, during that time, the government created the Troubled Asset Relief Program (TARP) which was commonly known as the bailout. After 2008, the government as well […]
The Role of Government in Financial Systems
In the previous articles, we have already established that the financial system of any country is the key to its economic prosperity. It is for this reason that these financial systems need to be appropriately maintained. The government is the party that is most suited to this maintenance of financial systems. However, too much government […]
Challenges of Risk-Based Supervisory System
In the previous articles, we have studied what a risk-based supervisory system for pension funds is. We have also studied the various steps which need to be taken in order to set up such a system. It is true that this system is being adopted on a large scale worldwide because of the various benefits […]
Procedure of Job Order Costing
Before the Job The first four stages are done before the job is being performed. The final purpose of this is to give a quotation to the clients. The calculation is done based on very little information. However, it needs to be precise. Here is the procedure: Stage 1: List the Cost Objects At the […]
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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