Cash flows from operating activities divided by (repayments of long-term borrowings + assets acquired + dividends paid) is the formula for:
A) borrowings ratio.
B) debt coverage ratio.
C) reinvestment ratio.
D) cash flow adequacy ratio.

Question

Quizplus · Accepted Answer

The cash flow adequacy ratio measures a company's ability to generate enough cash from operating activities to cover its major cash outflows, such as repayments of long-term borrowings, asset acquisitions, and dividend payments. This ratio is a key indicator of financial health, particularly in assessing a company's ability to sustain its operations and growth without relying on external financing.

Cash Flows from Operating Activities Divided by (Repayments of Long-Term