Forecasting Cash Flows: Gross Profit and Operating Costs

Two financial ratios - the gross profit margin, and the ratio of operating costs to sales - can provide a basis for forecasting future cash flows. Gross profit margin tells us how good a company is at selling its goods and services, while operating costs to sales hows us how much gross profit is used in the running of the company. Here we look at how both these ratios are calcualted and interpreted with real life examples.