Vaun's Pet Store paid $24,300 in interest and $32,000 in dividends last year.The times interest earned ratio is 4.1,and the depreciation expense is $126,200.What is the value of the cash coverage ratio?
A)8)77 times
B)5)19 times
C)7)75 times
D)9)29 times
E)8)20 times

Question

Quizplus · Accepted Answer

EBIT = 4.1 × $24,300 = $99,630
Cash coverage ratio = ($99,630 + $126,200)/ $24,300 = 9.29 times
This can also be calculated as:
Cash coverage ratio = 4.1 + ($126,200 / $24,300)= 9.29 times

Vaun's Pet Store Paid $24,300 in Interest and $32,000 in Dividends