Course 108: Learn the Lingo--Basic Ratios
Price/Cash Flow
In this course
1 Introduction
2 Earnings Per Share
3 Market Capitalization
4 Profit Margins
5 Price/Earnings and Related Ratios
6 Price/Sales Ratio
7 Price/Book Ratio
8 Price/Cash Flow
9 Dividend Yield
10 The Bottom Line

The price/cash flow (P/CF) ratio is not as commonly used or as well known as the other measures we've discussed. It's calculated similarly to P/E, except that it uses operating cash flow instead of net income as the denominator.

P/CF = (Stock Price) / (Operating Cash Flow Per Share)

Cash flow can be less subject to accounting shenanigans than earnings because it measures actual cash, not paper or accounting profits. Price/cash flow can be helpful for firms such as utilities and cable companies, which can have more cash flow than reported earnings. Price/cash flow can also be used in place of P/E when there are so many one-time expenses that reported earnings are negative.

Next: Dividend Yield >>


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