An Empirical Examination Of The Usefulness Of The Motley Fools Flow Ratio

Abstract

An item in the Motley Fool recently caught our attention. The article Cisco vs. Lucent: The Flow Ratio Tells All (by Matt Richey, June 6, 2000, in The Motley Fool.fool.com), introduced a new ratio that Richey claimed to be useful for measuring the investment worthiness of a company. Since our Financial Statement Analysis course covers traditional ratio analysis and since we were exploring some research ideas on measuring liquidity, the Fool Ratio seemed worthy of investigation.