Cash Flow Return on Sales, the acronym ROS (CF) is usually used. It is a term that refers to the financial efficiency of the enterprise. The indicator is derived from the indicator Return on sales (ROS), instead of profit the numerator appoints the CF. By this adjustment the indicator ROS (CF) is less affected by the degree of investment cycles and amortization of fixed assets.
Cash Flow Return on Sales = CF from operations / Annual Sales
If the indicator declines in the individual years, it means either revenue increase or decrease the company’s internal financial options.
The indicator belongs to the indicators based on cash flow.
Use of the indicator cash flow return on sales in practice: the CFO uses it in financial analysis to analyze ratios. Indicators based on cash flow, try to catch the warning signs of potential credit problems and assess the potential of internal financial company.
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