Cash Coverage Ratio

Cash interest coverage using CFO after cash interest and cash income taxes: (CFO + cash interest paid + cash taxes paid) / cash interest paid.

When to use: Use only when CFO includes both entered cash outflows. If interest or taxes are classified elsewhere, first restate CFO consistently to avoid adding back amounts it never deducted.

Calculator

Formula

\text{Cash Coverage} = \frac{CFO + \text{Cash Interest Paid} + \text{Cash Taxes Paid}}{\text{Cash Interest Paid}}

Variables

Symbol	Name	Description	Unit
CashCov	Cash Coverage Ratio	(CFO + interest + taxes) ÷ interest	integer
CFO	Cash Flow from Operations	Net cash generated by operating activities (from the cash flow statement)	$
CashInterest	Cash Interest Paid	Cash interest paid, included as an outflow in CFO	$
CashTaxes	Cash Taxes Paid	Cash income taxes paid, included as an outflow in CFO	$

Real-Life Examples

Example 1: Levered Industrial

CFO $400M, interest $50M, taxes $80M.

Given

CFO = $400,000,000.00CashInterest = $50,000,000.00CashTaxes = $80,000,000.00

Step-by-Step

1.Company-wide monetary amounts and share counts in the arithmetic below are in millions; per-share amounts are dollars. The Given inputs use full amounts.

2.Cash coverage = (400 + 50 + 80) / 50

3.CashCov ≈ 10.600000

Result:10.60

For these inputs, Cash Coverage Ratio is 10.600000 under the stated payment, compounding and accounting assumptions.

Frequently Asked Questions

Actual cash payments included in CFO, not automatically the income statement’s interest and tax expenses. The denominator is cash interest paid.

Restate CFO to the stated after-interest, after-tax convention before using this equation. Adding back an outflow classified as financing instead of operating would overstate coverage.

Related Formulas

Interest Coverage Ratio