Monitoring these KPIs can help you identify potential cash flow issues and take proactive steps to address them
1. Operating Cash Flow Ratio – measures the cash generated by a company’s operations to cover its current liabilities.
2. Free Cash Flow – the cash available to a company after accounting for capital expenditures.
3. Cash Conversion Cycle – measures the amount of time it takes a company to convert its investments in inventory and other resources into cash flow.
4. Receivables Turnover Ratio – measures the ability of a company to collect its outstanding accounts receivable.
5. Payables Turnover Ratio – measures how quickly a company pays off its suppliers.
6. Gross Margin Return on Investment (GMROI) – measures the profitability of inventory by looking at the gross margin it generates relative to the investment.
7. Debt Coverage Ratio – measures the ability of a company to pay off its debt obligations with cash flow.
8. Current Ratio – a liquidity ratio that measures a company’s ability to pay off its current liabilities with current assets.
9. Quick Ratio – a liquidity ratio that measures a company’s ability to pay off its current liabilities with its most liquid assets.
10. EBITDA – a measure of a company’s earnings before interest, taxes, depreciation, and amortization, which can provide insight into its cash flow generation.