The Study on Financial Index System of Profitability Evaluation Based on Cash Flow.pdf

The Study on Financial Index System of Profitability Evaluation Based on Cash Flow LI Tao LIU Xiao-yan School of Business Administration School of Business Administration North China Electric Power University North China Electric Power University Beijing, P.R.China Beijing, P.R.China litaol@263.net lliu716@ Abstract-This paper investigates two assessing Major income/sales ratio = income from major activities systems of enterprise’s profitability the existing one /major net sales 100% bases on accrual accounting, and the new one on the Net cash/net income ratio =net cash flow from operating basis of cash flow information. Making use of the data of activities/net income 100% listed companies’ financial reports from 1997 to 2004, Cost/income ratio =income before taxes/cost and which belongs to the security markets of Shanghai and expenses 100% Shenzhen, we set up two financial index systems of profitability evaluation. Comparing with two results, Although the traditional assessing system does an through an empirical research with the factor analysis effect on evaluating the equity’s achievements, its method that relies on the analysis of standardization and limitations are obvious along with the complications of coherence