Question

Compute two cash flow ratios. (Round ratios to 2 decimal places, e.g. 0.62.) Current cash debt coverage ratio 0.67 :1 Cash debt coverage ratio 0.38 :1

Answer 1

Answer:

1. 0.66 : 1
2. 0.25 : 1

Explanation:

1. Current Cash Debt Coverage ratio;

$= \frac{Net Cash from operating activities}{\frac{Opeing current liabilities + Closing current liabilities}{2} }$

Net Cash from operating activities = Net Income + Depreciation - Gain on sale of investments - Increase in Accounts receivable

= 33,840 + 11,331 - 3,731 - (43,440 - 23,040)

= $21,040

Current Cash debt coverage

$= \frac{21,040}{\frac{31,840 + 31,840}{2} }$

= 0.66 : 1

2. Cash Debt Coverage ratio;

$= \frac{Net Cash from operating activities}{\frac{Opeing total liabilities + Closing total liabilities}{2} }$

Opening liabilities = 31,840 + 42,840 = $74,680

Closing Liabilities = Accounts payable + Net notes + Bond

= 31,840 + (42,840 - 16,331) + 36,840

= $‭95,189‬

Cash debt coverage

$= \frac{21,040}{\frac{ 74,680 + 95,189}{2} }$

= 0.24772

= 0.25 : 1