Cash Flow to Debt

Cash from operations divided by total interest-bearing debt. Approximate measure of how many years of operating cash flow would be required to pay off all debt.

When to use: Use as a credit-quality screen. Investment-grade firms typically run >25%; high-yield often falls below 15%. The reciprocal (debt / CFO) tells you "years to pay off all debt with current cash flow" — a key rating-agency input.

Calculator

Formula

\text{CFO/Debt} = \frac{CFO}{\text{Total Debt}}

Variables

Symbol	Name	Description	Unit
CFOToDebt	Cash Flow to Debt	CFO ÷ total debt	%
CFO	Cash Flow from Operations	Net cash generated by operating activities (from the cash flow statement)	$
TotalDebt	Total Debt	Short-term + long-term interest-bearing debt	$

Real-Life Examples

Example 1: Investment-Grade Industrial

CFO $500M, total debt $1,200M.

Given

CFO = $500,000,000.00TotalDebt = $1,200,000,000.00

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.CFO/Debt = 500 / 1,200 ≈ 0.417 = 41.7%

Result:41.6667%

CFO/Debt of 41.7% — strong, consistent with investment-grade ratings. Equivalent to ~2.4 years of operating cash flow to retire all debt.

Frequently Asked Questions

It is annual CFO divided by interest-bearing debt. Its reciprocal is a rough number of years to repay debt only if CFO stayed constant and all of it were available for repayment.

Capital expenditures, distributions, debt maturities, future cash-flow changes and other uses of cash. It is not a repayment forecast.

Related Formulas

Debt-to-Equity Ratio

Interest Coverage Ratio

Cash Coverage Ratio

Cash Coverage Ratio Net Debt