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Price-to-Cash Flow Ratio

Trading Term

The Price-to-Cash Flow (P/CF) Ratio, is used to compare a firm’s market value to its cash flow. It is calculated by dividing the company’s market cap by the company’s operating cash flow in the most recent fiscal year; or, equivalently, divide the per-share stock price by the per-share operating cash flow. Cash Flow is defined as Income After Taxes minus Preferred Dividends and General Partner Distributions plus Depreciation, Depletion and Amortization. The Price-to-Cash Flow (P/CF) Ratio indicates the dollar amount that one must pay for each dollar of operating cash flow generated by the firm. Price-to-Cash Flow (P/CF) Ratio = Current Share Price / Operating Cash Flow per Share

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