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Category Archives for "Financial Ratio Analysis"

Operating Cash Flow Margin

This is a complete guide on how to calculate Operating Cash Flow Margin with detailed analysis, interpretation, and example. You will learn how to use its formula to evaluate a company’s profitability.

Definition - What is Operating Cash Flow Margin?

The operating cash flow margin is the percentage of a company’s earnings that flows down into the operating cash flow.

A high cash flow margin signifies an efficient business that doesn’t have excess expenses, while a low operating cash flow margin could be a sign of inefficiency.

Industries have varying standards for OCF margin, so when comparing the cash flow margin of multiple companies, it is best to do so within one specific industry.

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Preferred Dividend Coverage Ratio

This is a complete guide on how to calculate Preferred Dividend Coverage Ratio with detailed analysis, interpretation, and example. You will learn how to use its formula to evaluate a firm's dividend performance.

Definition - What is Preferred Dividend Coverage Ratio?

The preferred dividend coverage ratio (sometimes referred to as times preferred dividend earned) essentially tells you whether or not a company has made enough profit to pay off its preferred dividends.

So it’s a really important one for shareholders in particular but also gives you a sense of how well the company is doing.

Basically, it’s a way of measuring a company’s ability to pay or the relative burden those preferred dividends would have on the company.

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Return On Retained Earnings Ratio

This is an ultimate guide on how to calculate Return on Retained Earnings Ratio (RORE) with in-depth analysis, interpretation, and example. You will learn how to use its formula to evaluate a firm’s profitability.

Definition - What is Return on Retained Earnings Ratio?

The return on retained earnings ratio (RORE) measures how effectively a company uses its profits from the previous years.

The ratio can inform investors whether the company is better off investing its profits back into the company, or paying its shareholders a dividend.

A high ratio suggests that the company should invest heavily in itself, while a low ratio means a company may benefit from paying a larger dividend.

It is not commonly used by investors to assess the attractiveness of an investment.

It is mostly used as a measure to aid a management company in decision making regarding dividend payouts.

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Cash Flow Return on Investment Ratio

This is an in-depth guide on how to calculate Cash Flow Return on Investment Ratio (CFROI) with detailed interpretation, analysis, and example. You will learn how to use this ratio formula to assess a business profitability.

Definition - What is Cash Flow Return on Investment Ratio?

The cash flow return on investment (CFROI) is a metric that analyzes a company’s cash flow in relation to its capital employed.

This ratio is used by investors who believe that cash flow is the underlying driver of value in a company, as opposed to earnings or sales.

It is most informative when its compared to WAAC, because it allows investors to see the discrepancy between the amount a company paid to raise funds and the amount of return a company receives from those funds.

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