Cash Flow Ratios and Patterns

Why is persistent net income above CFO a cash flow red flag?

It suggests earnings rely heavily on accruals, not cash generation.

Why is the debt coverage ratio useful in cash flow analysis?

It shows how quickly operations could theoretically repay debt.

How is cash-basis interest coverage calculated?

$(CFO+$ interest paid $+$ taxes paid$)/$interest paid.

If a company reports positive net income but negative CFO, how should you classify that cash flow pattern?

A red flag for poor cash-based performance quality.