Depreciation to Cash Flow Definition and Explanation

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Quick Definition

An efficiency measurement gauging the impact of depreciation and amortization on cash flow.

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Depreciation to Cash Flow Formula

Explanation of Depreciation to Cash Flow

The Depreciation to Cash Flow ratio measures how well a company can sustain its level of cash flow and avoid market fluctuations.

Importance of Depreciation to Cash Flow

A high, or increasing Depreciation to Cash Flow ratio indicates the company’s cash flow is more predictable and is not having to ride the highs and lows of market conditions.

A company can be said to have a more efficient operation if the impacts of Depreciation and Amortization are low or decreasing.