Technicals Stability Returns



Understanding Cash Flow from Operations to Debt Ratio


Cash Flow from Operation (CFO) to Debt Ratio indicates how much time it will take for the company to meet its debt obligations by its cash flow from operations.

The ideal CFO to Debt ratio is 1. A high ratio indicates that the company's earnings from its operating activities are more than its debt. And low ratio indicates low operating cash flow than debts, and the company may not be able to meet its debt obligation.

The formula for Calculating Cash Flow from Operations to Debt Ratio

Cash Flow from Operations to Debt


Example: For the financial year Asian Paint Limited reported cash flow from operation as Rs.3683.35 Cr. and total debt as Rs. 340.23 Cr.
The value as per the formula (Cash Flow from Operation / Total Debt) is calculated as (3683.35 / 340.23) = 10.83.

Range Indicator of CFO to Debt Ratio

Range Indicator Comments Screener at TSR
Above 1.5 Strong Bullish Excessive CFO to Cover Debts NA
1.2 to 1.5 Bullish Surplus CFO to Cover Debts NA
1 to 1.2 Mild Bullish Sufficient CFO to Cover Debts NA
0.7 to 1 Neutral Stable CFO to Cover Debts NA
0.5 to 0.7 Mild Bearish Shortfall in CFO to cover Debts NA
0.3 to 0.5 Bearish Insufficient CFO to cover Debts NA
Below 0.3 Strong Bearish Deficiency in CFO to Cover Debts NA