Retained cash flow (RCF) to net debt

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

Retained cash flow to net debt divides funds from operations, less dividends paid, by net debt: the share of its debt a company could repay in a year from the cash it keeps after paying its shareholders. It is a rating-agency measure, met most often on utilities and other rated borrowers, in rating reports and in companies' own targets. A company with funds from operations of US$400m, dividends of US$150m and adjusted net debt of US$2,500m scores 10%. The debt is usually the agency's adjusted figure, with items such as pension deficits and leases added, so a company's published ratio may not match a plain calculation.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.