If a ﬁrm has only current assets and no ﬁxed assets of any kind, its times interest earned ratio must
exceed its cash coverage ratio.

Question

Quizplus · Accepted Answer

The cash coverage ratio takes into account both current and fixed assets, while the times interest earned ratio only considers earnings before interest and taxes. Therefore, a firm with only current assets may have a lower times interest earned ratio due to the absence of fixed assets, but its cash coverage ratio could still be higher.

If a ﬁRm Has Only Current Assets and No ﬁXed