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 to fall by only 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 make its interest payments, which means it may struggle to meet its financial obligations and may have difficulty in paying off its debts.

A Cash Coverage Ratio of Less Than One Indicates