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You find a company's price-to-cash flow ratio by dividing the market price of its stock by its cash receipts minus its cash payments over a given period of time, such as a year.
Some institutional investors prefer price-to-cash flow over price-to-earnings as a gauge of a company's value.
They believe that by focusing on cash flow, they can better assess the risks that may result from the company's use of leverage, or borrowed money.
- Browse Related Terms: Blue chip stock, Cook the books, Debt-to-equity ratio, Dividend payout ratio, Earnings per share (EPS), EBITDA, Free cash flow, Gross margin, Income statement, Net margin, Payout ratio, Price-to-cash flow, Profit margin, Return on equity, Revenue