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Cash Flow from Operations
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| Cash Flow to Total Debt =
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Short-Term Debt + Long-Term Debt
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Explanation of Cash Flow to Total Debt:
The Cash Flow to Total Debt ratio measures the length of time it
will take the company to pay its total debt using only its cash
flow. This assumes all the cash flow would be used to pay off the debt,
which is not realistically possible for a company to devote all of its cash
flow in this way. However, this ratio is used as a "what-if" scenario as
a basis to compare company results.
Importance of Cash Flow to Total Debt:
A high, or increasing Cash Flow to Total Debt ratio is usually
a positive sign, showing the company is in a less risky financial position
and better able to pay its debt load.
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