What is cash-to-debt ratio? Cash Flow to Debt Ratio

Cash Flow to Debt Ratio in English is an important indicator of a company's financial strength, indicating the ratio between the company's cash flow earned through operations and its debt during the financial cycle. The operating cash flow here does not include income from loans or investments. It is calculated by dividing the company's operating cash flow by its total debt, which allows a visual comparison between the cash flow the company earns from operations and the total debt the company should repay. In general, the higher the cash-to-debt ratio, the better. If the cash-to-debt ratio is greater than 1, it means that the company has enough cash to deal with debt. The higher the ratio, the higher the company's income after repaying debt, and it can be considered that the company's operating capabilities are better. On the contrary, when the cash-to-debt ratio is less than 1, it means that the company's income during the financial cycle is insufficient to cover all its debts. At this time, investors need to be vigilant. Of course, various factors will affect the company's cash-to-debt ratio. For example, some analysts will use EBIDTA or free cash flow instead of operating cash flow as numerator calculations, which will have different impacts on the results and analysis.