CF Return on Total Capital = CF from operating activities / capital
The resulting value is compared with the interest rate paid by the enterprise to banks. If the resulting value is lower, then the assets don’t generate as much as is needed to pay off the interest, and thus become risky. Conversely, if the resulting value is greater than the interest rate it is worth to receive new loans.
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.