1. What is the Debt To Cash Ratio?

The Debt To Cash Ratio measures a company's financial leverage by comparing its total debt to its cash reserves. It indicates how many times the company's debt could be paid off with its available cash.

2. How Does the Calculator Work?

The calculator uses the Debt To Cash Ratio formula:

Where:

• \( \text{Total Debt} \) — All outstanding debts and liabilities
• \( \text{Cash Reserves} \) — Available cash and cash equivalents

Explanation: A ratio of 1 means debt equals cash reserves. Higher ratios indicate greater debt relative to cash.

3. Importance of Debt To Cash Ratio

Details: This ratio is crucial for assessing a company's financial health, liquidity, and ability to meet short-term obligations. It's particularly important for creditors and investors evaluating risk.

4. Using the Calculator

Tips: Enter total debt and cash reserves in dollars. Both values must be positive, and cash reserves cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Debt To Cash Ratio?
A: Generally, lower ratios are better. A ratio below 1 indicates more cash than debt, while above 1 means more debt than cash.

Q2: How does this differ from Debt to Equity ratio?
A: Debt to Cash focuses on immediate liquidity, while Debt to Equity considers the capital structure long-term.

Q3: Should cash equivalents be included?
A: Yes, all liquid assets that can quickly be converted to cash should be included in cash reserves.

Q4: What industries typically have high ratios?
A: Capital-intensive industries like utilities and telecom often have higher debt levels relative to cash.

Q5: How often should this ratio be calculated?
A: For businesses, it should be monitored quarterly along with other financial metrics.