From a cash ﬂow position, which one of the following ratios best measures a ﬁrm's ability to pay the interest on its debts?
A) Times interest earned ratio
B) Cash coverage ratio
C) Cash ratio
D) Quick ratio
E) Interval measure

Question

Quizplus · Accepted Answer

The cash coverage ratio measures a firm's ability to pay the interest on its debts from the cash generated from operations. It shows how many times a company can cover its interest payments with its cash flow from operations, which is important for evaluating a company's solvency and ability to meet its debt obligations. The other ratios listed do not directly measure a firm's ability to pay interest expenses.

From a Cash ﬂOw Position, Which One of the Following