Cash Flow Coverage Ratio (Operating cash flow / Short term debt)
This ratio measures the ability of the company's operating cash flow to meet its obligations - including its liabilities or ongoing concern costs.
The operating cash flow is simply the amount of cash generated by the company from its main operations, which are used to keep the business funded.
The larger the operating cash flow coverage for these items, the greater the company's ability to meet its obligations, along with giving the company more cash flow to expand its business, withstand hard times, and not be burdened by debt servicing and the restrictions typically included in credit agreements.
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