In terms of a cash flow, the indicator of Years Current Liabilities Debt is a derived indicator of the Short-Term Debt Coverage Ratio and specifies the number of days the company needs to repay its short-term debts.
Alternative names of the Years Current Liabilities Debt:
- Years Current Liabilities Debt
- Calculation Period for Current Liabilities
- Years Debt for Current Liabilities
What Does the Years Current Liabilities Debt Show?
The indicator defines a certain period of time necessary to repay current debts at the expense of the operating cash flow. The lower the value, the better for the enterprise.
It is calculated to assess the enterprise’s solvency and its financial independence. Experts also calculate the indicator by means of a net cash flow, if only the enterprise’s capital is not formed according to a share or a joint-stock method.
Formula of the Years Current Liabilities Debt
This indicator is inversely proportional to the Cash Flow Liquidity Ratio and is calculated according to the following formula:
YCLD = 1 / (Operating cash flow / Current liabilities) = 360 / (Operating cash flow / Current liabilities), days
Normative Value of the Years Current Liabilities Debt
It’s better for the enterprise to maintain a low value of this indicator. Since current liabilities must be repaid within a year, the value should not exceed the period of one year. If the indicator is more than a year, it’ s necessary to attract third parties to repay liabilities.