Free Cash Flow / Debt

View Financial Glossary Index

Definition

Free Cash Flow to Debt is a ratio that shows the fraction of all debt that would be repaid in one year if all of the free cash flow went to repaying debt. It allows investors to see the company’s financial stability.

If the ratio is high, then the company can repay its debt more easily and can incur more debt than companies that have lower ratios.

Formula

Free Cash Flow / Average Total Debt

Note: See Free Cash Flow for its calculation

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