Cash flow coverage ratio

(redirected from Cash-Flow Coverage Ratio)

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 ?
Financial structure (Based on manufacturing sector, %) 1996 1997 2005 2006 Debt ratio 317.1 396.3 100.9 98.9 --SMEs 387.4 418.4 140.9 132.6 Total debt to total assets 47.7 54.2 22.9 22.4 --SMEs 41.5 46.8 30.8 30.9 2007 US Japan Debt ratio 97.8 126.7 128.2 --SMEs 129.1 -- -- Total debt to total assets 22.7 22.6 24.3 --SMEs 32.0 -- -- (1.) As of end-2007 (2.) As of end-Mar 2007 Source: The Bank of Korea Compared to 1997, the cash-flow of Korean companies has improved considerably, as indicated by the cash-flow coverage ratio ((cash from operations + interest expense)/(short-term loans + interest expense)).
Cash ratios (%) 1998 1999 2005 2006 2007 Cash-flow coverage ratio 43.9 59.9 89.1 90.5 88.7 Sales to operating cash ratio 9.4 11.0 8.7 8.8 9.1 Source: The Bank of Korea Korea's corporate bankruptcy ratio dropped drastically to 0.03 percent during the first nine months of 2008 from 0.40 percent during 1997.