CFO to Sales

View Financial Glossary Index

Definition

The Cash From Operations to Sales is a ratio that tells investors how capable a company is of generating cash from sales.

Investors often see a higher value of the ratio to be better for the company, similar to how they view high profit margins as better than low profit margins. However if a company has a low value of the ratio for a given period of time, it is not always a bad thing. A low ratio could mean that the company is increasing its net working capital in preparation for growth, but consistently low ratios are probably a bad sign.

Formula

CFO / Sales = Cash from Operations / Revenues

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