Identifying Sustainability: The Cash Flow Coverage Ratio

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Identifying Sustainability: The Cash Flow Coverage Ratio

There are a wide range of measures and metrics used to gather information as to the financial stability and growth of an enterprise; however, the Cash Flow Coverage Ratio reflects the immediate and the long term liquidity and sustainability of a company. In the simplest of terms, the Cash Flow Coverage Ratio identifies, in numbers, an entity’s ability to repay its debts. This ratio reveals a company’s financial health and whether or not the company is able to cover its financial obligations; this ratio also defines the number of times these obligations could be covered by the company’s earnings.

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