Cash to debt service ratio, Managerial Accounting

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Cash to debt service ratio

 Cash to debt service ratio also known as debt cash flow coverage ratio is an improvement over the interest coverage ratio and is calculated.

The logic of the ratio is that the interest payments are to be made out of cash inflow of the business and not profits and apart from interest expenses sinking fund appropriation on debt (which are generally made by various firm to enable itself to make repayment of the loans) should be considered to find out debt cash flow coverage as a measure of long term solvency of a firm. Genera's higher the coverage better it is as far as long term solvency of the firm is concerned.

 


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