Cash Flow Analysis 
This is simply a re-arranged cash flow statement with
the emphasis on debt servicing. The order of the major headings is as
follows, with outflows in brackets:
A. Cash from operations after tax (before debt service)
B. (Net interest payment)
C. (Scheduled loan repayments)
D. (Net capital expenditure)
E. Change in cash and new funding
This format looks to cash from operations as the primary source of funds
for payment of interest and scheduled loan repayments. It summarises the
position as if, pessimistically, maturing debt could not be refinanced
with new loans.
Interest cover, on a cash flow basis, is defined as A/ B.
Debt service cover is defined as A/ (B+C).
This perspective also assumes that all capital expenditure, other than
any capitalised repairs and maintenance, is discretionary rather than
necessary spending or can be financed with new debt. It therefore presents
capital expenditure and associated new debt finance as logically related
items, which come after meeting existing debt obligations in full from
internal cash flow.
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