Cash backing of earnings (OCF/net income)
Operating cash flow divided by reported profit. Above 1.0 means cash arrived faster than the accounting said it would.
It is the fourth Piotroski test on its own: cash beating earnings is the cleanest single accounting signal there is.
How it is computed here
Operating cash flow / net income
Measured over the latest complete fiscal year, as filed. Filed under quality. Higher is the stronger reading, other things equal.
No published threshold exists for this figure, so this page prints none. Read it against the company's own history and its peers instead.
When it misleads
- The stored key is named "accrual ratio" but the value is a cash-to-earnings ratio, so higher is better rather than worse.
- Meaningless when net income is negative.
- Before capital spending, unlike free cash flow conversion.
- Net income here is the whole group's, including minority interests, where the filing reports it, because operating cash flow is the whole group's too.
Questions
How is cash backing of earnings calculated?
Operating cash flow / net income. Measured over the latest complete fiscal year, as filed.
What does cash backing of earnings tell a value investor?
It is the fourth Piotroski test on its own: cash beating earnings is the cleanest single accounting signal there is.
When does cash backing of earnings mislead?
The stored key is named "accrual ratio" but the value is a cash-to-earnings ratio, so higher is better rather than worse. Meaningless when net income is negative. Before capital spending, unlike free cash flow conversion. Net income here is the whole group's, including minority interests, where the filing reports it, because operating cash flow is the whole group's too.