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 cash coverage ratio is calculated as EBIT (Earnings Before Interest and Taxes) plus depreciation, divided by interest expense. This ratio measures a company's ability to cover its interest obligations with its operating income before interest and taxes, with depreciation added back to account for non-cash expenses.

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