Question

The following are some figures from Laura Sweet Company’s 2020 financial statements: (in thousands) Cash                      $213 AR &nbs

The following are some figures from Laura Sweet Company’s 2020 financial statements: (in thousands)

Cash                      $213

AR                          341

Inventory                327

Net PP&E               6,571

AP                          250

Note Payable          1,474

Long-term Debt       2,386

Common Shares     1,200

Retained Earnings   2,336

Sales                      4,184

COGS                    2,664

Depreciation            570

Interest                   535

Income Tax             77

Required: Calculate the following ratio (round your answer to two decimals, percentage should be expressed with decimals, e.g. 14% = 0.14)  Cash Coverage Ratio

Homework Answers

Answer #1

Formula for Cash Coverage ratio:-

Cash Coverage ratio = (Earnings Before Interest and Taxes + Non-Cash Expenses)/Interest Expense

- Earnings Before Interest and Taxes = Sales - COGS - Depreciation = $4184 - $2664 - $570

= $950

- Non-Cash Expenses = Depreciation = $570

- Interest Expense = $535

Cash Coverage ratio = ($950 + $570)/$535

Cash Coverage ratio = 2.84

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