Explanation of Cash Flow Margin:

The Cash Flow Margin measures the Cash Flow from Operating Activities in relation to the Net Sales. 

Importance of Cash Flow Margin:

It is cash that a company needs to generate to pay its expenses and purchase assets, and how well a company can convert sales into cash is crucial.  Knowing that a company is continually improving its Cash Flow Margin is extremely valuable and is a key indicator of performance.  Companies that end up generating a negative cash flow are losing money as they generate sales and any company cannot keep this up over an extended period of time.  With a negative cash flow, the company will have to rely on cash reserves or take on more debt as they continue the business. You may have heard the slang term "burn-rate", which is often used to describe a company operating with negative cash flows - basically describing that the company is "burning" through its cash reserves. 

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