The Cash Flow of ABC Limited Essay Example | Topics and Well Written Essays - 1000 words

The hard currency draw of first principle Limited - Essay ExampleThe cash flow statement provides valuable information on the shade of income and sales, dividend and involvement addresss, the cash available per share and the cash returns generated by the assets. These are discussed in the following sections. In addition to the quick ratio or current ratio (Monetary Assets / occurrent Liabilities) and the liquidity ratio (Current Assets / Current Liabilities), another very useful ratio to analyses a unions performance is the quality of income (Net Cash Inflow from Operations/ Net Profit before Interest and Tax). The quality of income ratio helps understand the companys income a little better. The net cash inflow for first rudiment Limited is 155 and the network before interest and tax totals to 67, thus making its Quality of Income Ratio as 2.313. This ratio helps give way the substance of free cash that has been utilized to increase the capital expenditure. It computed as Retained Cash Flow (After Div. Paid) / Cash Paid for Acquisition. For the case of ABC Limited, the amount of money that has been invested to capital expenditures is 115 and the total amount of free cash is 134 (i.e. Net cash from Operating Activities less the tax gainful less the dividends paid = 155 - 15 6). Thus the capital expenditure ratio totals to 1.165%. It is clear that ABC limited has invested a high amount in capital expenditures and still there is a net increase in cash, indicating that the company has performed very well in terms of collecting the cash from the customers. The cash owing cover signifies the total amount of free cash (i.e. Net Cash income from operations less the tax, less interest and fewer dividends) that is used to settle the total owing of the company. Calculation of the cash owing cover raise be done by dividing the total owing by the retained cash from operations ( subsequently dividend). ABC Limited has a total owing of 72 m and the net free cas h after dividends totals to 134 m (155 15 6) thus making the cash owing cover to total to 0.537. Therefore the consequence of years to pay sullen debt is 0.5years or 6 months. This indicates that ABC limited can pay off the debts in a very short period.