Which of the following measures can be used to evaluate a company's ability to meet future debt obligations after paying income taxes and interest and making capital expenditures?
A)Earnings per share
B)Net income
C)Cash flow adequacy ratio
D)Net increase or decrease in cash and cash equivalents

Question

Quizplus · Accepted Answer

The cash flow adequacy ratio is the best measure to evaluate a company's ability to meet future debt obligations after paying income taxes, interest, and making capital expenditures. This ratio provides an indication of a company's cash inflows and outflows, which can be used to determine whether it will generate enough cash to cover its capital expenditures and debt obligations. Earnings per share and net income are measures of profitability and not of cash flows. The net increase or decrease in cash and cash equivalents only shows the change in the company's cash position and does not reflect its ability to meet future debt obligations.

Which of the Following Measures Can Be Used to Evaluate