Given here is the financial equation or accounting formula to calculate the net cash flow to creditors. Cash flow is an important factor in determining the financial stability of an organization. Weak cash flow indicates that the organization is poorly performing and strong cash flow indicates that there is an overflow of money within the organization. Net cash flow to creditors formula is derived as (I - N). where I = Interest Paid, N = Net New Borrowing.
Net cash flow to creditors formula is simple, just subtracting the net new borrowing from the interest paid. Cash flow from financing activities shows investors the company's financial strength.