A cash coverage ratio of less than one indicates:
A)The firm does not have enough cash to make its interest payments
B)The firm does have enough cash to make its interest payments, but not its lease obligations
C)The firm has too little depreciation expense
D)Earnings need only to fall by a small amount before interest obligations cannot be covered

Question

Quizplus · Accepted Answer

A cash coverage ratio of less than one indicates that the firm does not have enough cash to cover its interest payments, as the ratio measures the ability to pay interest from cash generated by operations.

A Cash Coverage Ratio of Less Than One Indicates