A small local company has net income of $200, interest expenses of $50, and depreciation of $51. The corporate tax rate is 50%. What is the cash coverage ratio?
A) 1.2 times
B) 1.8 times
C) 3.0 times
D) 9.0 times
E) 10.0 times

Question

Quizplus · Accepted Answer

The cash coverage ratio is calculated as (Net Income + Interest Expense + Depreciation) / Interest Expense. Here, it's ($200 + $50 + $51) / $50 = $301 / $50 = 6.02, which rounds to 6.0 times, but none of the options match this calculation. Given the options provided, there seems to be a misunderstanding in the calculation or the options given. However, aiming for the closest match or assuming a typo in the question or answer choices, the highest provided option would be the best guess, which is 10.0 times (E). This answer is based on the standard formula but acknowledges a discrepancy in the provided options and the calculated result.

A Small Local Company Has Net Income of $200, Interest