Cash Debt Coverage Ratio: How to Analyze Financial Health of a Business

5 min read

The Cash Debt Coverage Ratio (CDCR) is a measure of a company’s ability to cover its debt obligations from its cash flow. It compares the cash flow available to the company (measured by operating income or earnings before interest, tax, depreciation and amortization) to its total debt obligations. A higher coverage ratio indicates that the company is better able to meet its debt obligations while a lower ratio suggests that it may experience difficulties in making payments. The CDCR is a useful tool for investors when evaluating companies in the forex market. It provides a quick view of a firm’s financial strength and its ability to handle the risk involved with issuing debt.