Another ratio S&P Analyst Richard Tortoriello recommends to use is 'Operating Cash Flow to capital expenditure'. ('Quantitative Strategies for Achieving Alpha') This ratio is used by analysts to determine a company's ability to fund operations. It helps to get a better understanding of whether a company is able to buy more assets without having to issue debt or equity.
A rising cash flow to capital expenditures ratio might indicate that the company is in a position to grow.
Please note that some industries are more capital intensive than others, which should be taken into account when evaluating companies.
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How to detect earnings manipulation and to avoid a permanent loss of capitalAfter all, you only find out who is swimming naked when the tide goes out.Warren Buffett There a basically two main reasons for a total loss of capitalcompanies that are cooking the books; financial statements manipulation and fraud bankruptcyIn most cases these risk are frequently found together.. more...