Coverage Ratio of Financial Charges Concept

Coverage Ratio of Financial Charges seeks to measure the capacity of a company to provide enough results to support its financial nature duties, being calculated by the division of the earnings before the financial charges and the tax over the results (RAEFI) by the total financial charges. Alternatively, instead of RAEFI, it can be used Operational Cash Flow, which, for the fact of purging the results’ depreciation, gives a better information about the company’s capacity in releasing money with its operational activity. On the other hand, financial charges, beyond the financial costs, can also include the assets depreciations as a way to provide complete information about all of the financial demands associated to the funding.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.