The cash realization ratio (cash flow from operating activities divided by net income)is a useful measure of

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The cash realization ratio is a measure of how much of a company's reported net income is actually being converted into cash flow from operating activities. By dividing cash flow from operating activities by net income, the ratio shows the quality of earnings. High-quality earnings suggest that a company is generating strong cash flow from its operations, and therefore has a sustainable business model. Low-quality earnings, on the other hand, may indicate that a company's reported earnings are being subject to accounting manipulation or other distortions.

The Cash Realization Ratio (Cash Flow from Operating Activities Divided