Fundamental Glossary / Cash Flow Metrics
Cash Conversion Ratio
Operating cash flow divided by profit, or sometimes by EBITDA. It shows what share of the accounting result arrived as cash.
Formula
Operating cash flow / PAT, or operating cash flow / EBITDA. State which.
What it means
A ratio near 1, on a profit base, means earnings and cash moved together. Well below 1 means accruals, working capital, or non-cash profits are large.
Above 1 can mean conservative accounting, or a release of working capital that will not repeat.
How to read it
Track it over a cycle. A retailer before a festive build and after it will print very different ratios. The average is the information.
What to watch
A ratio that looks excellent because profit was depressed by a non-cash impairment is not improved cash conversion. Match the numerator and the denominator to the same story.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.