This ratio indicates the company ability to pay debt and interest in time. It measures company ability to cover company liabilities and its ongoing concern cost.
Debt coverage ratio = Operating cash flow/Total Debt
Short term debt coverage ratio = Operating cash flow/ Short term Debt
Dividend coverage = Operating cash flow/ Cash Dividend
Capital Expenditure Coverage = Operating cash flow / Capital Expenditure
Operating cash flow supply the necessary cash to keep the business funded and it is simply the cash generated from operations.
Operating cash flow is net cash provided or used by the operating activities and reflected under company cash flow statement.
Cash flow statement has three sections
In the operating section of cash flow, Net income is adjusted for non cash and non operating charges and adjusted for change in working capital or increase and decrease in current assets and current liability. This results in operating cash flow figure.