Financial Health: Debt & Cash Flow
How much debt a company carries and whether it generates cash to cover it.
In Simple Words
Financial health is whether a company can pay its bills and survive hard times. Debt shows what it owes; cash flow shows the cash it actually generates. Free cash flow is what's left after running the business and investing — money that can fund dividends, buybacks or savings.
Why It Matters
Even great companies can fail if they carry too much debt or run out of cash. Health checks protect you from avoidable disasters.
Key Terms
Total debt divided by shareholders' equity. Higher means more leverage.
Cash generated from normal business operations.
Operating cash flow minus capital spending. The cash a company can actually use.
How to Interpret It
If a company has high debt but strong, growing free cash flow, it can usually manage the debt. If debt is high and free cash flow is negative, that is a warning.
Beginner Mistakes
- Ignoring debt because growth looks exciting.
- Confusing accounting profit with actual cash generated.
Try It Yourself
Find one company's debt-to-equity and free cash flow in Warifin. Write whether its financial health looks comfortable or stretched.
Key Takeaway
Profit on paper is not cash. Check debt and free cash flow before trusting any growth story.
Open the real tool to practice.
Knowledge Check
Choose an answer, then check.1. Free cash flow is…
2. High debt with negative free cash flow is…
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Reading a Company Page
Warifin Company Analysis
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