Cash flow ratios for evaluating financial performance: A case study of listed manufacturing company in Sri Lanka

With the financial analysis of an entity, the cash flow statement may be more reliable than balance sheet and income statement information as because balance sheet and income statement information as because balance sheet information static and the income statement contains many non-cash transactions. The cash flow statement, however, is dynamic. It records the changes in the other statements over a period of time and focuses on the cash available for operations and investments. Traditional ratios have both positive and negative impact on the performance of an entity. When traditional ratios (current and quick ratios) are positive, profits may be increased. While at the same time, an entity may be in severe financial distress due to the inadequacy of cash. Against this backdrop, this paper sheds light on the importance and application of different types of cash flow ratios for evaluating financial performance. This study also made an attempt to predict financial health of the selected company. ABANS Listed manufacturing, through cash flow ratios for the period 2003–2007. It is found that the sample company has a very good financial flexibility with quality earnings and positive trends in scheduling its capital expenditure. The study reveals that the sample enterprise is not carrying a god liquidity position as well as it has shown a poor efficiency is not carrying a good liguidity position as well as it has shown a poor