Operating cash flow

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Operating cash flow monitors the movement of cash in and out of the company (Lewellen, 2016). It reports the money generated and spent during a specified period. The firm to discuss here is Safaricom Limited. The discussion will cover debt and dividend ratios for three years and also cash flow per share then provide economic importance of the proportions.

Operating cash flow/Total Debt

2016: 152627/825448=0.1849

2015: 136659/818588=0.1669

2014: 130951/750625=0.1745

According to the data, debt increased each of the three years as operational cash at Safaricom increased. A high debt ratio indicates that the company is largely reliant on borrowing money. A company benefits from having a low debt ratio (Penman & Yehuda, 2015). The debt ratio of 0.1849 in 2016 implies that lenders provide 18.49% of the company finances.

Operating cash flow/Cash dividend

2016: 152627/92104=1.6571

2015: 136659/82104= 1.6645

2014: 130951/65065=2.0126

This ratio shows the number of times a company can afford to pay its yearly dividends with its available operating cash flows. Given a figure of 2.0126 of operating cash flow to the dividend, shareholders are sure about the chances of getting investment payment. However, 2015 and 2016 reported a decline of 1.6645 and 1.6571 respectively. An investor should therefore, keep a keen look on the events that will happen in the company over the next three years. Despite the decline, the company has been able to increase its dividends payment in each of the three years.

Operating cash flow per share

2016: 152627/2904448=0.05

The information is usually of interest to management and shareholders because they are essential to company's success. A decline in this ratio is an indication that the company is finding it challenging to settle its debts (Penman & Yehuda, 2015).


Lewellen, J., & Lewellen, K. (2016). Investment and cash flow: New evidence. Journal of Financial and Quantitative Analysis, 51(4), 1135-1164.

Penman, S. H., & Yehuda, N. (2015). A matter of principle: Accounting reports convey both cash-flow news and discount-rate news.

February 01, 2023

Life Business

Subject area:

Money Accounting Cash Flow

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