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Capital expenditure coverage ratio

Capital expenditure coverage ratio

Description

Capital expenditure coverage ratio shows whether the company generates enough cash (from operating cash flow) to cover its’ expenses, paid for purchased capital asset or for made investments. Data to calculate this ratio is collected from balance sheet and cash flow statement.

Norms and limitations

There are no general norms for this ratio.

Higher capital expenditure coverage value shows lower usage of operating cash flow for capital expenditure. It is recommended to compare this ratio to those of the companies, working within the same industry.

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