Wednesday, February 4, 2009

CFO to Capital Expenditures

This long term solvency ratio assesses a firm’s ability to generate cash flow from ongoing operations in excess of the capital expenditure required to maintain the facilities and build plant capacity.

The extra cash flow can be used to service debt or other unanticipated costs.

CFO to Capital Expenditures Ratio=
(Cash Flow Continuing Operations)/ (Capital Expenditures)

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