EBIT goes from $30M to $33M; Depreciation goes from $10M to $12M; and interest expense goes from $6 M to $8M. What is the percent change in the numerator of the cash coverage ratio? What is the percent change in the denominator of the cash coverage ratio? A. 8.45%; 15.38% B. 13.33%; 12.50% C. 12.50%; 33.33% D. 13.33%; 33.33%

Question

Business

Courtney Sheppard

15 October, 23:27

EBIT goes from $30M to $33M; Depreciation goes from $10M to $12M; and interest expense goes from $6 M to $8M. What is the percent change in the numerator of the cash coverage ratio? What is the percent change in the denominator of the cash coverage ratio? A. 8.45%; 15.38% B. 13.33%; 12.50% C. 12.50%; 33.33% D. 13.33%; 33.33%

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Answers (1)

Know the Answer?

Rigoberto Jackson · Answer 1

The correct answer is A, 8.45%.

Explanation:

The cash ratio or cash coverage ratio is a liquidity ratio that measures a firm's ability to pay off its current liabilities with only cash and cash equivalents.

The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by the company's interest expenses for the same period.

30+10/6 / 33+12/8