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QuestionsCategory: Investor PsychologyFinancial quadrant – Cash Ratio and Cash Flow
ashz asked 3 years ago

Hi Victor 
I am currently stuck with some Keppel Corp and Semb Corp so I thought I will do an evaluation to see if worth buying more to average down since low prices.
For keppel corp, when calculating cash ratio for 2017, do I take only their “bank balance, deposits & cash” and ignore their other current assets like debts and short term investments (which are mostly shares in other companies) since its harder to convert them to cash? If so, the ratio would be 2.2/9.5 = 0.2? Or do I need to minus away anything from current liability? 
If calculating if operating cash flow is rising, do I just grab the number of 1377m for 2017 or do I need to delete away once off transactions like gain on disposal of subsidiaries / associated companies? 

1 Answers
Victor Chng answered 3 years ago

Hi Ashz,
 
For cash ratio, The formula is cash & cash equivalent / current liabilities. you can take their cash and also their short term investments (of course if you want to be conservative then you can remove this figure).
 
Operating cash flow have remove one off item already. For these 2 companies that you mentioned are cyclical companies hence it is better to use their 10 years average operating cash flow.