Formula to calculate cash flow coverage ratio:
Cash Flow Coverage Ratio = net income + depreciation and amortization/total debt payments.
Cash flow coverage ratio definition and explanation:
The cash flow coverage ratio indicates the ability to make interest and principal payments as they become due.
A cash flow coverage ratio of less than one indicates bankruptcy within two years.
The cash flow coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.