Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio? Round your final answer to two decimal places.
A) 15.42 times
B) 18.34 times
C) 14.15 times
D) None of the above

Question

Quizplus · Accepted Answer

Cash coverage ratio is calculated by dividing the sum of EBIT and depreciation by interest expense.

Cash Coverage Ratio = (EBIT + Depreciation) / Interest Expense

Substituting the values, we get:

Cash Coverage Ratio = (7,221,643 + 1,434,500) / 611,800 = 14.15 times

Therefore, the best choice is C, with a cash coverage ratio of 14.15 times.