Red Flags
Another ratio S&P Analyst Richard Tortoriello recommends using is 'Operating Cash Flow to capital expenditure'. ('Quantitative Strategies for Achieving Alpha') This ratio is used by analysts to determine a company's ability to fund operations. It helps to get a better understanding of whether a company can buy more assets without having to issue debt or equity.
A rising cash flow to capital expenditures ratio might indicate that the company is in a position to grow.
Please note that some industries are more capital-intensive than others, which should be considered when evaluating companies.
Formula:
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