Question

A firm has sales of $4,740, costs of $2,540, interest paid of $169, and depreciation of $473. The tax rate is 35 percent. What is the value of the cash coverage ratio

Answer 1

Answer:

the Cash Coverage Ratio is 13.02

Explanation:

The computation of the cash coverage ratio is as follows:

But before that the EBIDTA Is

EBIDTA = Sales - Cost

= $4,740 - $2,540

= $2200

Now Cash Coverage Ratio is

= (EBIDTA) ÷ Interest

= $2,200 ÷ $169

= 13.02

hence, the Cash Coverage Ratio is 13.02

Therefore the same is to be considered by applying the given formula