If a firm's cash coverage ratio is greater than its times interest earned ratio,then the:
A) firm's assets are not fully depreciated.
B) firm has no lease obligations.
C) firm has very little long-term debt.
D) firm has a high degree of liquidity.

Question

Quizplus · Accepted Answer

The cash coverage ratio includes both interest and non-cash expenses like depreciation in its calculation, while the times interest earned ratio only considers interest. If the cash coverage ratio is greater, it suggests that depreciation (a non-cash expense) is significant, indicating that the firm's assets are not fully depreciated.

If a Firm's Cash Coverage Ratio Is Greater Than Its