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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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