What is 'Cash FlowtoDebt Ratio'
The cash flowtodebt ratio is the ratio of a company’s cash flow from operations to its total debt. This ratio is a type of coverage ratio, and can be used to determine how long it would take a company to repay its debt if it devoted all of its cash flow to debt repayment. Cash flow is used rather than earnings because cash flow provides a better estimate of a company’s ability to pay its obligations. The ratio is less frequently calculated using EBITDA or free cash flow.
BREAKING DOWN 'Cash FlowtoDebt Ratio'
While it is unrealistic for a company to devote all of its cash flow from operations to debt repayment, the cash flowtodebt ratio provides a snapshot of the overall financial health of a company. A high ratio indicates that a company is better able to pay back its debt, and is thus able to take on more debt if necessary.
Another way to calculate the cash flowtodebt ratio is to look at a company’s EBITDA rather than cash flow from operations. This option is used less often because it includes investment in inventory, and since inventory may not be sold quickly, it is not considered as liquid as cash from operations. Without further information about the makeup of a company’s assets, it is difficult to determine whether a company is as readily able to cover its debt obligations in the EBITDA method.
Free Cash Flow Instead of Cash Flow From Operations
Some analysts use free cash flow instead of cash flow from operations because that measure subtracts cash used for capital expenditures. Using free cash flow instead of cash flow from operations may, therefore, indicate that the company is less able to meet its obligations.
The cash flowtodebt ratio examines the ratio of cash flow to total debt. Analysts sometimes also examine the ratio of cash flow to just longterm debt. This ratio may provide a more favorable picture of a company's financial health if it has taken on significant shortterm debt. In examining either of these ratios, it is important to remember that they vary widely across industries. A proper analysis should compare these ratios with those of other companies in the same industry.

Operating Cash Flow Ratio
A measure of how well current liabilities are covered by the ... 
Cash Ratio
The ratio of a company's total cash and cash equivalents to its ... 
Cash Flow From Financing Activities
Cash flow from financing activities is a category in a company’s ... 
NonOperating Cash Flows
Nonoperating cash flows are inflows and outflows of cash that ... 
Cash Asset Ratio
The cash asset ratio is the current value of marketable securities ... 
Operating Cash Flow Margin
Operating cash flow margin measures cash from operating activities as ...

Investing
Analyzing Comcast's Debt Ratios in 2016 (CMCSA)
Evaluate Comcast's most important debt ratios, and determine whether the company is using debt responsibly and capable of meeting obligations. 
Investing
Free Cash Flow Yield: The Best Fundamental Indicator
Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping. 
Investing
Analyze Cash Flow The Easy Way
Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors. 
Investing
Analyzing Amgen's Debt Ratios in 2016 (AMGN)
Learn about Amgen Inc. and its key debt ratios, such as the debttoequity ratio, interest coverage ratio and cash flowtodebt ratio. 
Investing
Cash Flow Indicator Ratios
Learn about the operating cash flow to sales ratio, free cash flow to operating cash flow ratio and free cash flow coverage ratio. 
Investing
Analyzing Pepsico's Debt Ratios in 2016 (PEP)
Learn about PepsiCo and its financial leverage by looking at its debttoequity ratio, interestcoverage ratio and operating cash flowtodebt ratio. 
Investing
The Essentials Of Corporate Cash Flow
Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself. 
Investing
Analyzing CocaCola's Debt Ratios in 2016 (KO)
Explore analyses of CocaCola's three key debt ratios in 2016, and learn why the company may be too aggressive in its financial leverage.

Are taxes calculated in operating cash flow?
Learn how taxes are involved with the calculations for a firm's operating cash flow, and the overall significance of operational ... Read Answer >> 
What metrics can be used when evaluating a telecommunications company to ensure its ...
Learn about some common and useful cash flow accounting ratios that investors can use to evaluate companies in the telecommunications ... Read Answer >> 
What is the difference between cash flow and free cash flow?
Learn about the main differences between cash flow and free cash flow. In addition to the differences, learn how to calculate ... Read Answer >> 
What are some alternative liquidity ratios to the cash ratio?
Learn what the cash ratio measures, and understand what two other liquidity ratios can be used by a company to replace the ... Read Answer >> 
How should I evaluate a company with negative cash flow investing activities?
Understand how a negative cash flow from investing activities should be evaluated. Learn the sources and uses of cash in ... Read Answer >> 
What sorts of factors decrease cash flow from operating activities?
Learn about the factors that reduce cash flow from operations. Find out how declining net income and efficiency ratios affect ... Read Answer >>