49
Free Cash Flow
Net Income +Accrued and Capitalized interest expense+ Depreciation and
amortization+ Operating lease and rental expense- declared dividends- capital
expenditures
Accrued and Capitalized interest expense +operating lease and lease rental
expense+ current position of long-term debt + current portion of capitalized
leased obligation
Table 2.25: Free Cash Flow Formula
From: The power of cash flow ratios, 1998
c)
Total Debt Ratio
The
total
debt
ratio
shows
the
total
of debt
a
company
has.
According to
Gibson (2007, p.321), total debt ratio act as an indicator to analyze the
company’s ability to meet its debt total payment. It is an excellent way to
measure
long
term solvency
of
a
company.
To
what
we
have
learnt,
a
company with low total debt ratio, indicate higher risk of bankruptcy.
Total Debt Ratio
Cash Flows from operating
Total Debt
Table 2.26: Formula for calculating total debt ratio
From: The Power of Cash Flow Ratio, 1998
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