Debt and Financing

CFADS shows how much cash from operations can be allocated to interest and principal; DSCR shows how far that cash covers current debt service. Debt capacity is understood only when the two measures are read together.

Debt capacity should not be judged by how much banks will lend or by Net Debt/EBITDA alone. In Türkiye the relevant test is whether interest and principal can still be serviced from CFADS under stress, as measured by DSCR.

A real and sustainable tax shield is the cash tax saving that is legally deductible, actually usable given the firm’s capacity to pay tax, timed correctly, and reasonably expected to continue under current tax rules. “Interest × tax rate” is only the theoretical starting point.

A firm’s cost of financing cannot be measured by the contractual nominal interest rate alone. The true cost requires jointly assessing all cash outflows incurred for the funds actually available and the tax savings that can in fact be used.

In financial theory the cost of equity normally exceeds the cost of debt; in Türkiye, in tight-money episodes such as 2018 and 2023–25, the spot cost of new debt has in some firms been able to exceed the cost of equity.

In bank lending decisions, what matters most is not only the documents submitted but the risk profile the firm presents. A strong application should include a short, coherent credit story supported by consistent data.

Financing constraints and financial flexibility are complementary frameworks. Drawing on the literature, this note offers practice-oriented reflections for financial managers in Türkiye.

In a high-interest environment, financing decisions must be made with greater care. Fifteen principles for assessing cost, maturity, currency, and cash-flow effects together.

The balance between the cost of capital and the need to protect the debtor is among the hardest issues in the debate on interest. The line between a reasonable return and exploitation cannot be drawn by the interest rate alone.

Interest is not merely the price of using capital; it is also a historical institution that reflects relations of power, risk, and justice—from agrarian societies to Islamic law.

Please click to access the document on various interest rate concepts (interest rates). The document addresses the questions listed on this page.