About Cash Coverage Ratio Calculator (Formula)
The Cash Coverage Ratio Calculator is a financial tool used to assess a company’s ability to cover its interest expenses with its available cash flow. The formula for calculating the cash coverage ratio is:
Cash Coverage Ratio = (Operating Cash Flow + Interest Expense) / Interest Expense
Where:
- Cash Coverage Ratio is the ratio that assesses a company’s ability to cover its interest expenses with its available cash flow. It is typically expressed as a decimal or a percentage.
- Operating Cash Flow represents the cash generated by a company’s core operating activities.
- Interest Expense is the total interest payments made by the company during a specific period.
This ratio provides insight into the company’s financial health and its capacity to meet its interest obligations. A higher cash coverage ratio indicates a stronger ability to cover interest expenses with available cash flow, which is generally a positive indicator of financial stability.
The Cash Coverage Ratio Calculator is a valuable tool for investors, creditors, and financial analysts when assessing a company’s creditworthiness and its ability to meet debt obligations. It helps stakeholders make informed decisions about lending, investing, or extending credit to the company.