Financial Analysis Using the Statement of Cash Flows

Abstract

Managers use many financial ratios to judge the health of their businesses. With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards Board, managers now have a new set of ratios that will give a realistic picture of the business. The ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations to cash flow in investments. These ratios are particularly useful because they show changes in a hotel or restaurant's cash position over time, rather than at a given moment, as is the case with many other ratios.