Assume the following data: EBIT = 100; Depreciation = 40; Interest = 20; Dividends = 10.Calculate the cash coverage ratio.
A)7
B)5
C)4.7
D)14

Name: Assume the following data: EBIT = 100; Depreciation = 40; Interest = 20; Dividends = 10.Calculate the cash coverage ratio. A)7 B)5 C)4.7 D)14
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Quizplus · Accepted Answer

Cash coverage ratio is calculated as EBIT + Depreciation / Interest. 
In this case, the ratio is (100 + 40) / 20 = 7. This means that the company is generating enough cash to cover its interest expenses 7 times over.

Assume the Following Data: EBIT = 100; Depreciation = 40;