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Cash Flow from Operations
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| Cash Flow to Capital Expenditures =
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Capital Expenditures
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Explanation of Cash Flow to Capital Expenditures:
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.
Importance of Cash Flow to Capital Expenditures:
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.
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