Cash Flow Coverage Ratio
Calculate the cash flow coverage ratio, a solvency ratio that measures a company’s ability to pay off its debt with its operating cash flow.
The cash flow coverage ratio assesses a company’s ability to meet its debt obligations by comparing its operating cash flow to its total debt. A higher ratio indicates a stronger ability to cover its debt with cash generated from operations.
The formula is as follows:
\[\text{Cash Flow Coverage Ratio} = \text{Cash Flow from Operations} / \text{Total Debt}\]Cash Flow Coverage Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_cash_flow_coverage_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["MCD", "SBUX", "YUM"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_cash_flow_coverage_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How much of their total debt could McDonald's, Starbucks and Yum! Brands cover with one year of operating cash flow from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| MCD | 0.1852 | 0.1517 | 0.181 | 0.1819 | 0.1925 |
| SBUX | 0.2537 | 0.1847 | 0.2443 | 0.2362 | 0.1784 |
| YUM | 0.1407 | 0.1127 | 0.1332 | 0.1375 | 0.1688 |
Parameters
get_cash_flow_coverage_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |