Cash Flow to Capital Expenditures

Measures a company's efforts to invest in itself by acquiring long term purchases.

The Cash Flow to Capital Expenditures ratio measures a company's efforts to acquire long term purchases to better equip itself to do business. Capital Expenditures of some companies go in cycles - making a series of large purchases over a few periods followed by a time of relative small activity while the company attempts to recoup its investments. Resultantly, this ratio will also often fluctuate in cycles, depending on the company's activities.

A high, or increasing Cash Flow to Capital Expenditures ratio is usually a positive sign, indicating the company has financial flexibility to invest in itself and make upgrades to its buildings, machinery, and processes. This ratio is very industry specific - industries requiring large financial investments to operate will have a significantly different result than industries requiring small financial outlays.

Tags: Financial Ratio