Cash Flow Interest Coverage, usually not abbreviated. It is a term that indicates the enterprise’s ability to pay interest from generated cash flow. The indicator is derived from the interest coverage ratio, in which the profit is replaced by cash flow. In addition, in the calculation savings on income tax of legal entities are reflected.
Cash flow interest coverage = operating CF + paid interest × (1-t) / Paid interest × (1-t)
The indicator belongs to indicators based on cash flow.
Use of the indicator in practice **: In the enterprise it is used by CFO in financial analysis to **analyze ratios. Indicators based on cash flow try to catch warning signs of potential credit problems and assess internal financial potential of the company.