The ﬁnancial ratio measured as EBIT plus depreciation, divided by interest expense, is the:
A) Cash coverage ratio.
B) Debt-equity ratio.
C) Times interest earned ratio.
D) Gross margin.
E) Total debt ratio.

Question

Quizplus · Accepted Answer

The financial ratio measured as EBIT plus depreciation, divided by interest expense, is the cash coverage ratio. This ratio measures a company's ability to pay interest expenses with its cash flows from operations. A high cash coverage ratio indicates that a company has enough cash to cover its interest payments and is therefore less risky for creditors.

The ﬁNancial Ratio Measured as EBIT Plus Depreciation, Divided by Interest