PRICE TO CASH FLOW (P/CF) | ||||||||||
Definition | ||||||||||
Market capitalization / Cash flow or Share price / Cash flow per share | ||||||||||
Comment | ||||||||||
This ratio is often favoured over the PER because operating cash flow is arguably a better measure of business efficiency than net earnings, which is very much influenced by accounting principles as well as by management policies. P/CF ratio widely varies from industry to industry : heavy investment businesses such as auto manufacturing or cable TV tend to have lower multiples than less capital intensive industries, like software. | ||||||||||
Calculation Rules | ||||||||||
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Reference | ||||||||||
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