What We Teach and What They Do: A Comparative Analysis of Ratios
Dr Jennifer L. Harrison
Southern Cross University, Tweed Heads, Australia
Email: jennifer.harrison@scu.edu.au
Dr Anja Morton
Southern Cross University, Lismore, Australia
Email: anja.morton@scu.edu.au
Preferred Stream:
Stream 7 (Management Education and Development)
i
What We Teach and What They Do: A Comparative Analysis of Ratios
ABSTRACT
Financial statement analysis is a skill most business/commerce bachelors’ and masters’ degree
graduates will need in their workplace, irrespective of their specialisation. For this reason, most
related degrees are structured so that financial statement analysis is covered in one of the compulsory
first year or core subjects. As educators of future managers we have an obligation to provide our
students, at this introductory level, with the opportunity to learn the latest, simple, financial statement
analysis ratios. To achieve some measure of the degree to which we fulfil this obligation, a survey was
carried out of the financial statement analysis chapters of Australian introductory accounting
textbooks to determine the extent to which: 1. the ratios recommended in them are consistent; 2. they
include the ratios recommended by Carslaw and Mills (1992) (the only other related prior research
known to the authors); and 3. they include ratios used in practice. All of the textbooks surveyed
recommended traditional ratios such as the current ratio, return on equity, debtors and inventory
turnovers, earnings per share and debt ratio. However, cash flow ratios were found to be covered
inconsistently with very limited coverage in most books surveyed. Other ratios, such as the net debt to
equity ratio and net tangible asset backing, were also found to be missing, but were found to be
commonly disclosed in company annual reports and were covered in other reflections of practice.
Keywords:
management education, organisational performance, ratio analysis
Interpreting an entity’s financial performance and position is an integral part of much economic
decision-making and ratio analysis, which is an important financial statement analysis tool (Gallizo,
Jiménez & Salvador 2003), is used in all aspects of business – finance, management, marketing and
accounting. Financial statement analysis is a skill taught in universities to first year business students
and although textbook authors in this area, as in others, have an obligation to keep all aspects of their
content up-to-date and accurate, this does not always appear to be the case. Evidence of this is to be
found in Carslaw and Mills (1992) (hereafter, C&M), who reported a deficiency in American
intermediate accounting textbooks with respect to cash flow ratio analysis. The nature of ratios used in
financial statement analysis is subject to development and change, requiring changes in what we teach
to reflect what is done in practice. Therefore, with the aim of informing educators and textbook
authors, this paper reports a survey of the financial statement analysis chapters of Australian
introductory accounting textbooks that considers the extent to which: 1. the ratios recommended in
them are consistent; 2. they include the ratios found to be deficient in American textbooks by C&M
and recommended by C&M; and 3. they include ratios used in practice.
1
LITERATURE REVIEW
Ratio analysis has emerged as the main tool used to carry out financial statement analysis (Gallizo,
Jiménez & Salvador 2003) and is a standard component of introductory accounting and finance
courses in both undergraduate and coursework masters’ business programs. While it might be assumed
that authors of introductory accounting and finance textbooks would update their material to reflect
current practice in a timely fashion, this is not necessarily the case. American textbooks have been
shown to be slow to integrate cash flow statement analysis after the introduction of mandatory
standards requiring companies to produce this statement (C&M). We are unaware of any similar
Australian studies or prior surveys of the financial statement analysis chapters of Australian
introductory accounting textbooks. Many of these textbooks are adaptations of American texts but
whether the deficiencies found by C&M fifteen years ago have been addressed is unknown. Our study
compares Australian textbook coverage of cashflow ratios to C&M and extends C&M by considering
all ratios. We also extend the C&M study by comparing textbook coverage with practice.
A listed company’s annual report is widely considered to be the most important source of public
information available to investors and can have a significant impact on investment decision making.
While the financial statements are regulated and audited, other sections of the report, which mostly
contain voluntarily disclosed information, have long been known to be more commonly relied on by
unsophisticated investors (Lee & Tweedie 1975). One of these sections is the historical summary,
which provides key financial data, usually including ratios, over a five- or ten-year period. Other
sections of the report also contain ratio data, sometimes in graphical form. Since most ratios are
disclosed in the report on a voluntary basis, it follows that those ratios are viewed by management as
having some significance to investors and other users. This is in line with literature suggesting that
voluntary disclosures will only occur where the benefits of the disclosure are expected to outweigh the
costs (Bhojraj, Blacconiere & D’Souza 2004).
While a significant number of Australian and international studies have sought explanations for
voluntary disclosures in company reports (for example, Whittred 1987; Bradbury 1992; McKinnon &
Dalimunthe 1993; Hossain & Adams 1995; Camfferman & Cooke 2002), these studies have not
specifically investigated ratio disclosures, instead focusing on the overall level of information
voluntarily disclosed. An exception is Watson, Shrives and Marston (2002) but their study of
voluntary disclosure of accounting ratios by UK companies did not report the specific ratios disclosed,
only broad categories. Furthermore, the data from their study is now quite old, being based on annual
reports from 1989 to 1993 and advances in financial statement analysis have appeared in the academic
literature in the intervening years; for example extensions upon traditional Du Pont analysis (Firer
1999; Tezel & McManus 2003).
2
Two recent Australian studies shed some light on the ratios important in practice. The first (Beattie &
Jones 1999) examined financial graphs in the annual reports of top 100 companies in Australia. This
study, though not focussed on ratio disclosure specifically, found that earnings per share and dividends
per share were reported in graphs in just over 35% of 89 annual reports. Return on capital employed
(using various definitional forms) and net asset value per share were also reported in graphical form.
The second study (Mather & Peirson 2006) examined financial covenants in 36 public and 41 private
debt contracts. The study found that interest cover, dividend cover and current ratios formed part of
some public and private debt covenants and, in addition, accounts receivable and other turnover ratios
were specified in private debt covenants.
METHOD
This paper compares the content of the financial statement analysis chapter of textbooks to each other
and to practice. Ratios used in practice were determined by investigating the nature of the ratios
disclosed by companies in their annual reports and by surveying the ratios used by online investment
service providers. Thus, data for this research was collected predominately through content analysis of
company annual reports, relevant websites and introductory accounting texts. Each of these is now
outlined.
A list of accounting texts aimed at an Australian introductory-level university student audience was
developed for this study based on lists provided by representatives from leading textbook publishers
and lists available from a major textbook retailer. All texts identified in this way contained a chapter
on ratio (or financial statement) analysis. The list of 11 texts included in the sample for this study is
provided in Table 1. The ratios included in the ratio chapter in each of these textbooks were compiled,
along with their categorisations and definitions.
[Insert Table 1 here]
Financial ratios used in practice were defined to be those reported in company annual reports and
those reported in online financial databases. While several online financial databases and investor
websites exist, FACTIVA (2007), Commsec (2007), Yahoo!7 Finance (2007), MSN.Money (2007),
Investopedia (2007), About.com (2007) and the ASX (2007) beginners online course were used in this
study due to their size and popularity among investors. The sites are also representative of those listed
in Kinsky’s (2007) widely used Australian popular book on online investing. The sites report ratios for
individual listed companies or provide introductory guides to ratio analysis.
Companies were selected from the ASX All Ordinaries Index constituent list at 30 June 2005, which
consisted of 485 of the largest listed Australian companies by market capitalisation. Larger firms were
the focus of this study because ratio disclosure and innovation is more likely to be found in larger
companies (Watson, Shrives & Marston 2002). Companies in the Financials and Energy Global
3
Industry Classification Standard (GICS) sectors were excluded, as were companies in the Metals and
Mining industry within the Materials sector. These exclusions were made because companies in these
industries have very different reporting and legal requirements and disclosure practices (Hossain &
Adams 1995). After exclusions, the list contained 274 companies. A sample of 100 companies was
drawn from the remaining 274 companies using stratified random sampling based on GICS (Global
Industry Classification Standard) sector. The final sample consisted of 97 companies, two being
excluded because only 10-K reports were filed and one being excluded because it was a utilities
investment fund, rather than operating company.
Two annual reports were collected for each company; one based on the new accounting standards,
which first came into effect for companies with a December 2005 balance date, and the other based on
the previous accounting standards. Three companies in the sample were taken over, de-listed or
reported in another currency in the later period and so only their pre-standard-change annual reports
were included. Each annual report was examined for disclosure of ratios and various aspects of each
disclosure were recorded. For the purposes of the analysis reported in this paper, only ratio names and
definitions were recorded elements of interest.
Judgement was required in determining whether a particular disclosure was indeed related to a
financial ratio. In many cases this was straightforward as, for instance, in the case of earnings per
share, interest cover, gearing, return on equity and many other textbook “standard” ratios. However,
narratives in particular caused significant deliberations. Many narratives referred vaguely to
“margins”, “investment returns” or “shareholder returns” and in the end it was decided to include all
such references as ratio disclosures. Often this decision was affirmed further into the report, where
more detailed references to the ratios would be found.
RESULTS
The key findings of the content analysis of company annual reports are briefly described in this
section, followed by findings related to the survey of textbooks. With respect to the latter, first, the
financial statement analysis chapters of the textbooks were compared to each other. Second, these
chapters were compared to practice as represented by ratios reported in company annual reports and
those reported in online financial databases.
Ratios in Annual Reports
Over a hundred different financial statement ratios were found in the 2006 annual reports of the
companies included in our sample. However, on closer examination, many of these were found to be
slightly different versions of the same ratio, but still over fifty unique ratios were accumulated from
the voluntary disclosures in the surveyed annual reports. A list of these ratios is too large for inclusion
in this paper, but these ratios fell into the traditional clusters: cash flow; liquidity; financial stability;
4
profitability; and turnover/efficiency ratios. Some ratios are required to be disclosed by the Australian
Accounting Standards (2007), for example, dividends and earnings per share (AASB101.95 and
AASB133.66). The ratios we were most interested in were the ones disclosed voluntarily, but we
found that our sample companies referred to earnings per share in close to a hundred different ways.
In contrast, dividends per share was disclosed quite consistently (we did not, however, review the face
of the income statement). Eight different types of cash flow ratios were found to be used by companies
in annual reports. While financial stability ratios were disclosed in at least 17 different ways, by far the
most common way of referring to it was “gearing” and various forms of net debt to equity. Other
commonly disclosed ratios were interest cover, asset backing per share, profit margin, return on equity
and return on assets. Many varied forms of these ratios were disclosed.
Comparison of Textbooks
Table 2 lists the ratios recommended in the 11 textbooks surveyed. The ratios are listed within
categories, in order of the total number of books that recommend the ratio in exactly the same format.
It is noteworthy that out of the total of 57 ratios listed in Table 2, only six appear in each book in
exactly the same format. These are: return on equity; days debtors; days inventory; earnings per share;
interest coverage; and current ratio. All books also recommended gearing ratios, but in five different
formats. Several texts use different clusters of ratios as well as different ratios. It may be reasonable to
assume that those ratios that are recommended by 10 or 11 textbooks are the most important. Apart
from these common ratios, there is little consistency across the textbooks surveyed. Cash flow ratios in
particular are treated inconsistently with seventeen different types of cash flow ratios being included
across 6 textbooks. Despite their importance, 5 textbooks included no cash flow ratios, the majority of
the remaining books recommended between one and three cash flow ratios, one book recommended
ten cash flow ratios. Surprisingly, only 2 books recommended net tangible asset backing, book value
per ordinary share and market to book value.
[Insert Table 2 here]
Comparison of textbooks with practice – cash flow ratios
First, we compared the cash flow ratios recommended in the textbooks surveyed to those identified as
important by C&M. Table 3 lists the cash flow ratios recommended by C&M and the number of
textbooks that also recommend the same ratio. It is obvious that the deficiencies in cash flow ratios
identified by C&M in 1992 still remain. Four of the C&M ratios are not recommended by any of the
Australian books surveyed and the remaining five are covered in only one or two books. The most
notable of the missing ones is cash flow per share, where cash flow is defined as cash from operating
activities. This is notable because cash flow per share is also used extensively in practice. Considering
the sources used in this study, cash flow per share is disclosed voluntarily by several companies in
5
annual reports and is included in ASX (2007), FACTIVA (2007) and MSN.Money (2007). Cash flow
per share is considered to provide a better indication of a company’s ability to pay dividends in the
future than earning per share, because earnings are more easily manipulated.
Second, we compared the cash flow ratios used in practice to those recommended in the textbooks.
One important ratio was found to be missing from the textbooks surveyed – share price to cash flows
from operating activities. Table 1 shows that three textbooks recommended the reciprocal of this ratio,
but no other textbook recommended this ratio. Some analysts consider cash flow as perhaps a
company’s most important financial barometer, and the ratio of share price to cash flow is favoured by
many over the price-earnings ratio (MSN.Money 2007).
[Insert Table 3 here]
Comparison of textbooks with practice – other than cash flow ratios
The comparison of the ratios in textbooks to practice also revealed that the net debt to equity ratio,
while extensively used in practice, is not recommended by any of the textbooks surveyed. The concept
of net debt (total debt – cash and cash equivalents) was used extensively in the sample annual reports
as a denominator or numerator in various ratios – rarely accompanied by a definition. The most
common usage is in the net debt to equity ratio – this being considered to be a more refined measure
of gearing, but most probably only by a manager wishing to show gearing in a more favourable light
(Taylor 2007).
Also missing from the vast majority (9 out of 11) of the textbooks was net tangible asset backing.
This ratio was commonly disclosed voluntarily by companies in annual reports and in internet based
financial service reports. Dividends per share is also a glaring omission from most of the textbooks
surveyed.
DISCUSSION AND IMPLICATIONS
The aim of this research was to compare what we teach about financial ratios, as indicated by leading
introductory accounting textbooks, with the ratios evident in practice, as indicated by a sample of
company annual reports and a sample of finance databases and internet sites where investors can
access information. Our survey of Australian introductory accounting books revealed a lack of
consistency and omissions of important ratios. Ratios that are in common usage in practice and have
been recommended in previous research are not included in textbooks used in Australian introductory
accounting courses, or are included in only a few. The important missing ratios are cash flow ratios
identified by C&M (refer Table 3), the share price to cash flow ratio, the net debt ratio, net tangible
asset backing and dividend per share.
6
The lack of cash flow ratios found in the textbooks is surprising given their extensive use in practice
and given that the requirement to prepare a statement of cash flows has existed, in Australia, since
1992. Even more surprising is that this requirement has existed in the US since 1988 and many of the
textbooks surveyed in this study are adaptations of US textbooks. We have not discussed the relative
importance of specific cash flow ratios – simply noted that most textbooks surveyed are deficient in
this area.
The net debt to equity ratio is important for our future managers and investors to understand because it
can be used by managers to “window dress” the gearing ratio by showing a company’s capital
structure in a more favourable light (Taylor 2007). This occurs because the calculation of net debt
deducts cash and cash equivalents from debt, effectively reducing the apparent level of debt used by a
company, despite the fact that the cash amounts deducted may not be available to pay off the debt
because it will be used to pay off short term obligations.
Little consensus was also found to exist as to the relative importance of different ratios, apart from the
six that appear in all textbooks and are used extensively in practice. These six ratios were return on
equity, days debtors, days inventory, earnings per share, interest coverage and current ratio. However,
beyond these ratios, textbook authors seem to have used judgement as to which ratios they included.
As management educators we always wrestle with the content of our courses and first year accounting
courses are already full of content. However, we need to keep that content up-to-date. The question
then arises as to which specific ratios should be included in textbooks. C&M, for example, recommend
eight different cash flow ratios. This may be regarded as too many additional ratios to expect students
to learn. On the other hand, textbooks could include all financial statement ratios and leave the
decision about which ratios students study to lecturers. However, on the basis of our findings about
practice, we strongly recommend that cash flow ratios, the net debt ratio, net asset backing ratio and
dividends per share should be included in all introductory accounting textbooks.
Financial statement analysis is a skill most business/commerce bachelors’ and coursework masters’
degree graduates will need in their workplace, irrespective of the specialisation chosen in the degree.
For this reason, most degrees are structured so that financial statement analysis is covered in one of the
compulsory first year subjects. As educators of future managers we have an obligation to provide our
students, at this introductory level, with the opportunity to learn the latest, simple, financial statement
analysis ratios. The number and nature of the ratios covered in each separate offering of this topic
across different universities is unknown. It may well be that lecturers of this topic are supplementing
the textbook and including the ratios noted as missing in this paper. However, if they are relying only
on the textbook, they may be missing the opportunity for their students to acquire more relevant
knowledge.
7
REFERENCES
About.com (2007) Investing for beginners, accessed at
http://beginnersinvest.about.com/cs/investinglessons/l/blassetturnover.htm on 19 June 2007.
Atrill P, McLaney E, Harvey D and Jenner M (2006) Accounting: An introduction, Pearson, Frenchs
Forest.
ASX (2007) Beginners online courses: analysing and selecting shares, accessed at
http://www.asx.com.au/webmcq/shwaa2/eim2/courses/o_asxeque/index.html on 13 June 2007.
Australian Accounting Standards (2007) Chartered Accountants financial reporting handbook, John
Wiley, Sydney.
Bazley M, Hancock P, Berry A and Jarvis R (2004) Contemporary accounting, Thompson,
Melbourne.
Beattie V and Jones M J (1999) Australian financial graphs: An empirical study, ABACUS, 35(1): 4676.
Birt J, Chalmers K, Beal D, Brooks A, Byrne S and Oliver J (2005) Accounting business reporting for
decision making, John Wiley, Brisbane.
Bhojraj S, Blacconiere WG and D’Souza JD (2004) Voluntary disclosure in a multi-audience setting:
An empirical investigation, The Accounting Review, 79(4): 921-947.
Bradbury ME (1992) Voluntary disclosure of financial segment data: New Zealand evidence,
Accounting and Finance, 32(1): 15-26.
Camfferman K and Cooke T (2002) An analysis of disclosure in the annual reports of UK and Dutch
companies, Journal of International Accounting, 1: 1-28.
Carslaw CA and Mills R (1992) Cash flow analysis in intermediate accounting textbooks, Accounting
Educators' Journal, 4(1): 111-123.
Commsec (2007) Company profiles, accessed at http://comres.comsec.com.au/ on 18 June 2007.
FACTIVA (2007) Companies/markets, FACTIVA database, accessed on 18 June 2007.
Firer C (1999) Driving financial performance through the du Pont identity: A strategic use of financial
analysis and planning, Financial Practice and Education, 9(1): 34-45.
Gallizo JL, Jiménez F and Salvador M (2003) Evaluating the effects of financial ratio adjustment in
European financial statements, European Accounting Review, 12(2): 357-377.
Hoggett J, Edwards L, and Medlin J (2006) Financial accounting, John Wiley and Sons, Brisbane.
Hossain M and Adams M (1995) Voluntary financial disclosure by Australian listed companies,
Australian Accounting Review, 5(2): 45-55.
Horngren CT, Harrison WT, Smith Bamber L, Best P, Fraser D and Willett R (2007), Financial
accounting, Pearson, Melbourne.
Investopedia (2007), Dictionary, accessed at http://www.investopedia.com on 20 June 2007.
8
Jackling B, Raar J, Williams B and Wines G (2007) Accounting: a framework for decision making,
McGraw-Hill, Sydney.
Juchau R, Flanagan J, Mitchell G, Tibbits G, Ingram RW, Albright TL, Baldwin BA and Hill J (2006)
Accounting information for decisions, Thomson, Melbourne
Kimmel PD, Carlon S, Loftus J, Mladenovic R, Kieso DE and Weygandt JJ (2006) Accounting:
building business skills, 2nd edn, John Wiley & Sons, Brisbane.
Kinsky R (2007) Online investing on the Australian sharemarket, 3rd edn, Wrightbooks, Milton, Qld.
Lee T and Tweedie DP (1975) Accounting information: An investigation of private shareholder usage,
Accounting and Business Research, 5(20): 280-291.
Marshall D, McCartney J, Van Rhyn D, McManus W and Viele D (2005) Accounting: what the
numbers mean, McGraw-Hill, Sydney.
Mather P and Peirson G (2006) Financial covenants in the markets for public and private debt,
Accounting and Finance, 46(2): 285-307.
McKinnon JL and Dalimunthe L (1993) Voluntary disclosure of segment information by Australian
diversified companies, Accounting and Finance, 33(1): 33-50.
MSN Money (2007), Investment, stocks, advisor FYI definition, accessed at
http://moneycentral.msn.com/investor/alerts/glossary.asp?TermID=51 on 26 June 2007.
Taylor J (2007) Lease accounting and tax: Net debt reporting,
http://www.executivecaliber.ws/sys-tmpl/netdebtreporting/ on 26 June 2007.
accessed
at
Tezel A and McManus G (2003) Disaggregating the return on equity: An expanded leverage approach,
Journal of Applied Finance, 13(1): 66-71.
Trotman K and Gibbins M (2005) Financial accounting, an integrated approach, Thomson,
Melbourne.
Watson A, Shrives P and Marsdon C (2002) Voluntary disclosure of accounting ratios in the UK, The
British Accounting Review, 34(4): 289-305.
Weygandt JJ, Chalmers K, Mitrione L, Fyfe M, Kieso DE and Kimmel PD (2007) Principles of
financial accounting, John Wiley and Sons, Brisbane.
Whittred G (1987) The derived demand for consolidated financial reporting, Journal of Accounting
and Economics, 9: 259-285.
Yahoo! Finance (2007) Investing, research, profiles, accessed at http://au.finance.yahoo.com/ on 16
May 2007.
9
TABLES
Table 1: Textbook Surveyed
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Atrill et al. (2006) Accounting: An Introduction.
Bazley et al. (2004) Contemporary Accounting.
Birt et al. (2005) Accounting Business Reporting for Decision Making.
Hoggett, Edwards, & Medlin (2006) Financial Accounting.
Horngren et al. (2007), Financial Accounting.
Jackling et al. (2007) Accounting A Framework for Decision Making.
Juchau et al. (2006) Accounting Information for Decisions.
Kimmel et al. (2006) Accounting: Building Business Skills.
Marshall et al. (2005) Accounting: What the Numbers Mean.
Trotman and Gibbins (2005) Financial Accounting, An Integrated Approach.
Weygandt et al. (2007) Principles of Financial Accounting.
10
Table 2: Ratios Recommended by Textbook Authors (Sample size: 11)
Ratio Classifications1 /Ratio
Profitability
Performance
Return on equity
Return on assets
Gross profit margin
Net profit margin rate of return on sales
Profit margin (rate of return on sales)
Return on assets Dupont formula
Operating expenses to sales ratio
Equity multiplier
Expense ratio
Interest cost as a percentage of sales
Financial structure and long term
solvency, or Solvency
Capital Structure
Financial leverage, or Gearing, measures
Financial stability ratios
Interest coverage ratio
Debt ratio (debt-to-assets)
Debt to equity
Equity ratio
Leverage (capitalisation ratio)
Gearing ratio
Cash based ratios2
Cash flow to sales revenue (cash return on
sales)
Cash flow ratio (current cash debt
coverage)
Cash return on assets
Long term debt payment (Debt coverage)
Operating cash flow per share
Capital expenditure ratio
Cash debt coverage ratio
Reinvestment ratio
Cash flow adequacy 1
Cash flow adequacy 2
Cash return on equity
Debt coverage
Depreciation-amortisation impact
Dividend payment
Dividend payout
Quality of income (or operations index)
Repayment of long-term borrowings
Investing cash flow/Total assets
No. of
Textbooks
8
1
11
10
8
7
6
3
2
1
1
1
5
1
2
1
11
9
6
4
3
1
6
5
4
3
3
2
2
2
1
1
1
1
1
1
1
3
1
1
Ratio Classifications1 /Ratio
Efficiency
Asset efficiency
Activity (turnover) ratios
Activity measures
Operating efficiency
Days debtors
Days Inventory
Times debtors turnover
Times inventory turnover
Asset turnover
Accounts payable turnover
Asset turnover period
Average age of PPE assets
Average useful life of PPE assets
One day's sales
Plant and equipment turnover
No. of
Textbooks
3
2
1
1
1
11
11
10
10
8
1
1
1
1
1
1
Investment ratios
Market based ratios
Market performance
Per share ratios
Earnings per share
Price earnings ratio
Dividend payout ratio
Dividend yield
Dividend per share3
Earnings yield
Net tangible assets backing
Book value per ordinary share
Market to book value
Preference dividend coverage ratio
1
1
1
1
11
10
7
5
3
3
2
1
1
1
Liquidity
Financial Stability
Short-term solvency
Current ratio
Quick asset ratio
Acid-test ratio
8
1
1
11
7
4
Notes:
1 Two of the textbooks surveyed did not classify ratios into any categories. The different labels given to each category across the textbooks
surveyed are given in this table (with the number of textbooks that used the label).
2 Many of the cash based ratios were listed in other categories such as profitability, efficiency or liquidity, depending on the ratio and the
textbook.
3 Only three textbooks included the dividends per share calculation in the financial statement analysis chapter, one additional textbook
mentioned it elsewhere in the book.
11
Table 3: Comparison of cash flow ratios recommended by C&M with textbooks
Cash based ratios recommended by C & M
Cash debt coverage (Debt to cash flow)
Cash return on equity
Cash flow return on assets
Cash flow per share
Cash Interest coverage
Cash dividend coverage
Free cash coverage
Quality of income (operations index)
Number of textbooks
2
1
2
0
0
0
0
2
12