Cash debt coverage is computed by dividing net cash provided by operating activities by
A) average non-current liabilities.
B) average total liabilities.
C) ending non-current liabilities.
D) ending total liabilities.

Question

Quizplus · Accepted Answer

Cash debt coverage ratio measures a company's ability to repay its debts from its operating cash flow. It is computed by dividing net cash provided by operating activities by average total liabilities. This ratio is an important measurement of financial solvency and is used by investors and creditors to analyze a company's financial health. Options A, C, and D all relate only to non-current liabilities, which does not provide a complete picture of a company's debt.

Cash Debt Coverage Is Computed by Dividing Net Cash Provided