Which of the following accounting ratios considers the importance of cash flows relating to required interest payments?
A) receivables turnover
B) cash coverage ratio
C) debt/equity ratio
D) times interest earned ratio

Question

Quizplus · Accepted Answer

The cash coverage ratio measures a company's ability to meet its interest payments from operating cash flows. It takes into account the importance of cash flows relating to required interest payments. Option A (receivables turnover) measures the efficiency of a company's collection of accounts receivable. Option C (debt/equity ratio) compares the amount of debt a company has to its shareholder's equity. Option D (times interest earned ratio) measures a company's ability to meet its interest payments by evaluating its earnings before interest and taxes relative to its interest expenses.

Which of the Following Accounting Ratios Considers the Importance of Cash