Analyzing Financial Statements answeres Essay Example | Topics and Well Written Essays - 500 words - 1

Analyzing Financial Statements answeres - Essay Example Operating cash flow relates to cash flows that a company accrues from operations to its current debt. It measures how liquidity a firm is in the short run since it relates to current debt and cash flows from operations. (Gregor, 2008) The ratio -0.133 is less than which means Sears Company is not generating enough cash to pay off its short-term debt which is a serious situation in the company. This is a critical concern and a matter of urgency. If it is not dealt with it may lead to liquidation of the company. Therefore, it is possible that the firm may not be able to continue to operate. (Sears, 2013) The price to cash flow ratio is often considered a better indication of a companys value than the price to earnings ratio. It is a really useful ratio for a company to know, particularly if the company is publicly traded. It compares the companys share price to the cash flow the company generates on a per share basis. (Gregor, 2008) This implies that the price to cash flow ratio is quite small and that the ratio price ought to be increased for the shareholders. Ordinarily, share price is usually the closing price of the stock on a particular day and operating cash flow is taken from the Statement of Cash Flows. Some business owners use free cash flow in the denominator instead of operating cash flow. (Gregor, 2008) Normally, Cash flow from Operations/Average total liabilities is a similar ratio to the commonly-used total debt/total assets ratio. Both measure the solvency of a company or its ability to pay its debts and keep its head above water. (Anonymous, 2008) The answer shows how many times over a company can meet its short-term debt and is a measure of the firms liquidity. This ratio means that Sears Company has a low degree of settling its debts by the use of the current assets. (Wood, 2009) The quick ratio, or acid test, is a more specific test of liquidity than the current ratio. It takes inventory out of the equation and measures