I don't know if you've read Creative Cash flow reporting by Charles Mulford but I definately suggest it. I saw one of the member's post about it when discussing the book "Quality of Earnings," but that is where I found these ideas for your spreadsheet. It is a great book and I suggest you read it (whenever you have time). I plan on adding these ratios along with others from the book. Hope you found them as useful as I do
Anyways to the suggetion, I was thinking it would be nice to add the two ratios mentioned above in the topic name. ECM (Excess cash margin) measures the relationship between adjusted operating cash flow and adjusted operating earnings. Changes in ECM measure a company's ability to generate operating cash flow relative to its operating earnings.
ECM=((OCF-OE)/Rev) x 100. (Operating Cash flow minus- Operating Earnings)/Rev x 100)
The other ratio is the "Working Capital Ratio." It measures how many days revenue was consumed for working capital. I believe this is an effective measure in particular because it will show the analyst how growth effects operating cash flows. It is summarized as such: The sum of receivables to revenue plus inventory to revenu and prepaids to revenue less the sum of payables to revenu and accruasl to revenue. I.E. Receivables to Rev=10%, P/paids to Rev=8.9%, Payable to Rev.= 3%
(18.9-3=15.9%), then take recprocal (1/15.9%)=6.3, divide by 365 (365/6.3)=58 days worth of revenue tied up in working capital. Note this was taken from page 329 of book.
There are many other great measures form the book, just didn't want to post it all.
P.S Great work on F/S spreadsheet….Great interpretation of A/R analysis fro, "Q of A" book along with the others.
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