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Definition of Cash Flow Coverage Ratio

Definition: What is Cash Flow Coverage Ratio?

Cash flow coverage ratio is the liquidity ratio which is used to measure the efficiency of the company to pay off its current obligation with its operating cash flow.

Definition of Cash Flow Coverage Ratio

From this ratio, we can analyze that, how easily a firm can pay its expenses from the company’s operation. Cash flow coverage ratio shows the money of the company to meet the current obligation of the company.

Through this ratio, investors, management, and analyzers can get a broad overview of the operating efficiency of any company.

For the issuance of a loan to any company, banks check the cash ratio of the company first. You can also learn about Cash Flow Coverage Ratio Formula.

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