What are the advantages of the current money debt coverage ratio?

The primary advantage of the current ratio of money debt coverage is that it reveals the ability of the company to meet its current debt obligations. It has been found that the company's cash flow from operation and its division by current obligations. The secondary advantages of the ratio include the fact that it measures liquidity based on the beginning and end of the fiscal year and is more accurate in predicting the ability of the company to pay its financial obligations.

companies need sales operations to survive. In the short term, the lack of reasonable liquidity may force the business to borrow more than it is able to repay or sell assets to reduce, rather than expand the operations. The current ratio of cash debt coverage reflects how many times the company could repay its current obligations from its current net cash flow. This is an advantage for investors who need an exact picture of the company's financial situation.

Investors often investigate whether the company has a financial promise from theA bunch of shares, bonds, or providing considerable private investments brings the risk that it will not be seen future return. The current ratio of money debt coverage is a way to obtain a quick image of the company's ability to finance its own existence without having to examine and interpret the aspects of detailed financial statements. A low or negative ratio may indicate problems with the company's strategy or the adoption of the market with its products and services. Because investors owe future payments in the form of dividends or lump sum when they sell their shares and bonds, it is a good indicator of a solid current ratio of money debt coverage by a good indicator that they will be paid.

Another advantage of the ratio is that it shows the current ability of the company to meet its debts. It shows how many cash flows the company generated compared to the payout of the liability it needed. This benefit for investors because they can sell their stake in the company at any time. The ratio can provide a larger levelIt is isolated cash from operation during the past year and the amount of regular repayments of debt incurred from loans, orders from sellers and maintaining assets and equipment.

Healthy ratio of cash debt coverage should reflect a higher number on the left side, which represents cash, or at least a number corresponding to the number on the right side, which represents a debt. The scale for a company with reasonable liquidity is often 1: 1. Depending on the society industry, what is considered an acceptable character may vary. On average, some industries have a higher net cash flow due to debt than others, such as those with online sales platform, because these businesses usually incur low overhead costs.