The cash debt coverage ratio is computed by dividing net cash provided by operating activities by
A)average long-term liabilities.
B)average total liabilities.
C)ending long-term liabilities.
D)ending total liabilities.

Question

Quizplus · Accepted Answer

The cash debt coverage ratio measures a company's ability to pay off its long-term debt using the cash generated from operating activities. Therefore, it is calculated by dividing net cash provided by operating activities by average total liabilities, which includes both long-term and short-term liabilities. Ending long-term liabilities or ending total liabilities alone would not provide an accurate picture of a company's debt obligations over the entire period.

The Cash Debt Coverage Ratio Is Computed by Dividing Net