Profiles of Cash Flow Components

Cash flow information is widely recognized as a fundamental input to analyses of company financial health and theoretical value. In particular, evaluation of management performance can depend critically on a hierarchy of cash flow relationships. These include the investment coverage ratio, the discretionary coverage ratio, the discretionary and fixed expenditures ratio and the total coverage ratio. Annual financial statement data for a sample of 333 companies were used to calculate standardized values for 13 cash flow components over the 1982-86 period. The results show that cash flow components, as a percentage of total cash flow, vary across company size and industry groups. These cash flow profiles can serve as a reference for comparative analysis.