Total Free Cash Ratio

Total Free Cash Ratio shows the solvency of the company, i.e. its ability to repay interest on loans considering also the necessity to provide the current activity of the enterprise.

Alternative names of Total Free Cash Ratio:

  • Total Free Cash Ratio
  • TFC.

What Does Total Free Cash Ratio Show?

Total Free Cash Ratio (TFC) is used to assess the company’s ability to repay debts, taking into account the need to pay dividends and finance its operating activity. The indicator is compared to that of similar enterprises in order to predict whether the company can repay interest in the future.

Formula of Total Free Cash Ratio

TFC = Free cash flow / Interest, operating lease, current payments of long-term interest, current lease liabilities.

Normative Value of Total Free Cash Ratio

There is no normative value for TFC. However, the higher the total free cash flow, the better for the enterprise.