Cash flow to capital expenditures ratio

The cash flow to capital expenditures ratio is used to determine an organization’s ability to acquire capital assets using its free cash flow. It is calculated by dividing cash flow from operations by capital expenditures. A high ratio indicates that a business has a reduced need to use debt or equity funding to support its capital expenditure requirements. Conversely, a low ratio indicates that management may be constrained by funding availability, and so may need to retain fixed assets longer than would normally be the case.