The Foolish Flow Ratio

I'm a big fan of the Fool.com and I read their stock articles regularly trying to find the latest bargain. Here's an interesting article regarding how "The Flow Ratio" measures the ratio of a company's "bad" assets to its "good" liabilities. Contrary to accounting principles, inventory and accounts receivables are more of a liability than an asset. Also current liabilities are actually assets to the company.

"The Flow is used to measure how well a company manages its working capital (i.e., current assets and current liabilities). Effective working capital management can add dollars to the bottom line, as it should result in improved cash flow.
It's also an indication of the way that a company manages its overall
business. Companies that have higher Flow Ratios are often focused more
on managing earnings than managing their cash flows. Since we believe
that cash earnings are what really drive the value of a business, we
prefer companies with tight cash management, as measured by a low Flow Ratio"

Ratio.-Stock Article Link

             (Total Current Assets - Cash)
Flow Ratio = -------------------------------------
        (Total Curr. Liab. - Short-term Debt)

When we look at the Flow Ratio, our Foolish standard is 1.25 or less.