Cash flow coverage ratio

(redirected from Cash Flow Coverage Ratios)

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.

Cash Flow Coverage Ratio

The ratio of a company's annual earnings before interest and taxes to its annual debt service and other liabilities. These liabilities may include preferred dividends and rent. Banks use the cash flow coverage ratio to help determine whether to make or refinance loans. A cash flow coverage ratio equal to or greater than one indicates that the debtor is able to service the debt on its profit. See also: Debt-service coverage ratio.
References in periodicals archive ?
Few farmers and their bankers are interested in acquiring land due to really tight cash flow coverage ratios. Few producers start up in agriculture unless ushered in by a retiring producer.
The company's cash flow coverage ratios, namely its CFO interest coverage and debt service coverage ratio declined to 2.41 times (FYE March 2011: 3.55 times) and 0.4 times (FYE March 2011: 1.67 times) respectively in FP Dec 2011 due to higher cash payments to suppliers.
Finally, banks usually monitor cash flow, and will often prescribe cash flow coverage ratios (for example, cash flow during any given period must be a minimum of X times interest, or Y times principal and interest).
The agency views the company's business risk profile as strong and its financial risk profile as minimal, despite some weakening in its cash flow coverage ratios in fiscal 2010, which falls within expectations.
credit-rating agency attributed the review to Yamaha's strong operating performance and also to an improvement in cash flow coverage ratios, supported by the rapidly growing Asian market and its ongoing rationalization efforts.