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1993•Cornell Hotel and Restaurant Administration QuarterlyRequires access

Financial Analysis Using the Statement of Cash Flows

Raymond S. Schmidgall, A. Neal Geller, Charles L. Ilvento

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Abstract

Managers use many financial ratios to judge the health of their businesses. With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards Board, managers now have a new set of ratios that will give a realistic picture of the business. The ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations to cash flow in investments. These ratios are particularly useful because they show changes in a hotel or restaurant's cash position over time, rather than at a given moment, as is the case with many other ratios.

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What this paper is about

Managers use many financial ratios to judge the health of their businesses. With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards Board, managers now have a new set of ratios that will give a realistic picture of the business. The ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations to cash flow in investments. These ratios are particularly useful because they show changes in a hotel or restaurant's cash position over time, rather than at a given moment, as is the case with many other ratios.

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Available abstract

Managers use many financial ratios to judge the health of their businesses. With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards Board, managers now have a new set of ratios that will give a realistic picture of the business. The ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations to cash flow in investments. These ratios are particularly useful because they show changes in a hotel or restaurant's cash position over time, rather than at a given moment, as is the case with many other ratios.

Key concepts: Cash flow statement, Cash flow, Cash flow forecasting, Statement of changes in financial position, Cash management, Operating cash flow, Business, Finance

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