Cash Flow

The cash flow to debt ratio is a financial ratio that measures a company’s ability to cover its total debt with its operating cash flow. It is calculated by dividing the cash flow from operations by the total debt outstanding, providing insight into how many years it would take to repay all debt assuming constant cash flow. This ratio is widely used by financial analysts and creditors to evaluate a company’s liquidity and financial health, particularly its capacity to manage debt without relying on external financing.
Unlike the debt service coverage ratio (DSCR), which focuses on annual debt payments, the cash flow to debt ratio considers the entire debt balance, making it a broader indicator of leverage. A higher ratio suggests stronger debt repayment ability, while a lower ratio may signal financial strain.