Cash Current Debt Coverage RatioThe Cash Current Debt coverage ratio measures a companys ability to repay their current debt. Unlike the current and acid test ratio which looks at the year end balamce of assets this ratio looks at the net cash provided by operating activities. The formula looks like this (Cash From Operations-Dividends) / (Average current liabilities) For example if a company had $50 million in cash from its sales, paid out $25 million in dividends, and had average current liabilities of $25 million the formula would look like this. ($50 million-$25 million)/(25 million) That would give you a Cash Current Debt Ratio of 1. If the number is below 1 that means the company is unable to pay their current debt. If it is over 1 that means the company has excess money and is a good investment. Like this page, Link to us.
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