Cash Flow to Debt Coverage Ratio Calculator

Assess your company's ability to cover debt with operating cash flow.

This calculator helps you evaluate your business's financial health by comparing operating cash flow to total debt. A higher ratio indicates stronger debt repayment capacity.

Examples

See how the cash flow to debt ratio works in real scenarios.

Small Business Example

basic

A small business with $60,000 operating cash flow and $150,000 total debt.

Operating Cash Flow: 60000

Total Debt: 150000

Including Interest Expense

interest

A company with $120,000 operating cash flow, $400,000 total debt, and $25,000 interest expense.

Operating Cash Flow: 120000

Total Debt: 400000

Interest Expense: 25000

Advanced Analysis

netIncome

A business with $200,000 operating cash flow, $500,000 total debt, $40,000 interest expense, and $80,000 net income.

Operating Cash Flow: 200000

Total Debt: 500000

Interest Expense: 40000

Net Income: 80000

Low Cash Flow Scenario

lowCashFlow

A company with $10,000 operating cash flow and $100,000 total debt.

Operating Cash Flow: 10000

Total Debt: 100000

Other Titles
Understanding the Cash Flow to Debt Coverage Ratio: A Comprehensive Guide
Master the essentials of debt analysis for your business.

What is the Cash Flow to Debt Coverage Ratio?

  • Definition and Importance
  • Key Formula
  • Financial Health Indicator
The cash flow to debt coverage ratio measures a company's ability to repay its total debt using operating cash flow. It is a crucial solvency metric for lenders, investors, and business owners.
Formula: Operating Cash Flow / Total Debt

Quick Examples

  • A company with $100,000 cash flow and $200,000 debt has a ratio of 0.5.
  • A ratio above 1.0 means the company generates enough cash to cover its debt in one year.

Step-by-Step Guide to Using the Calculator

  • Input Required Data
  • Review the Results
  • Interpret the Ratio
Enter your company's operating cash flow and total debt. Optionally, add interest expense and net income for deeper analysis.
Click 'Calculate' to see your results instantly.

Step-by-Step Examples

  • Input: $60,000 cash flow, $150,000 debt → Ratio: 0.4
  • Input: $120,000 cash flow, $400,000 debt, $25,000 interest → Ratio: 0.3

Real-World Applications of the Ratio

  • Creditworthiness Assessment
  • Investment Analysis
  • Internal Benchmarking
Lenders use this ratio to evaluate loan applications. Investors assess company risk. Businesses benchmark their financial health over time.
A higher ratio means lower risk for creditors and investors.

Practical Use Cases

  • Banks require a minimum ratio for business loans.
  • Investors compare ratios across companies in the same industry.

Common Misconceptions and Correct Methods

  • Ignoring Non-Operating Cash Flows
  • Confusing with Debt-to-Equity Ratio
  • Overlooking Seasonal Variations
Some users mistakenly include non-operating cash flows or confuse this ratio with other debt metrics. Always use operating cash flow and total debt for accuracy.
Check your data sources and calculation method carefully.

Misconception Examples

  • Do not use net income instead of cash flow.
  • Exclude investment and financing cash flows.

Mathematical Derivation and Examples

  • Step-by-Step Calculation
  • Ratio Interpretation
  • Advanced Analysis
To calculate, divide operating cash flow by total debt. For advanced analysis, compare with interest coverage and net income ratios.
Example: $200,000 / $500,000 = 0.4 (40%)

Calculation Examples

  • Advanced: Add interest expense for interest coverage ratio.
  • Compare ratio trends over multiple years.