Operating Cash Flow Ratio

I like a company with solid operating cash flow. When it comes to cash flow, start-ups generally do not have much to show. Because, they are start-ups. They generally fund their operations by means other than income generated from their own operations. Beg, borrow or what have you! At some point, they have to turn into a self-perpetuating entity. That is the whole principle behind origin of life. Self-perpetuation! Generate, preserve and replicate faithfully, still leaving enough room for innovation, the information required for organization of an entity as complex as life itself. That has been the modus operandi of life on earth. A business venture, if it wants to survive and thrive, has to follow the course what evolution of life has followed on earth. Or else, it would turn into dinosaur in a couple of years. Therefore, it is a great occasion to celebrate when the first dollar of profit shows up in the company wallet. It has arrived though not quite! It has begun its journey towards independence – a step towards self-perpetuation! Cash flow ratio will provide a glimpse into the financial soul of a company. In business vernacular, cash flow is expressed as Cash Flow (from operation)/ Current Liabilities. It simply tells us if it generates enough cash to pay for its day-to-day expenses, or it needs to borrow.