Question

lucas company has provided the following information: cash flow from operating activities, $361,900 net income, $309,800 interest expense, $32,850 interest cash payments, $21,900 income tax payments, $259,000 income tax expense, $247,900 using the modified method discussed in the text, what was lucas' cash coverage ratio? multiple ch

Answer 1

The cash coverage ratio is a financial metric that indicates a company's ability to meet its interest expenses. To calculate it, divide the cash flow from operating activities by the interest expense.

Step-by-step explanation:

The cash coverage ratio is a financial metric that indicates a company's ability to meet its interest expenses. It measures the company's cash flow from operating activities relative to its interest expense. To calculate the cash coverage ratio, you need to divide the cash flow from operating activities by the interest expense.

In this case, Lucas Company's cash flow from operating activities is $361,900, and its interest expense is $32,850. Therefore, the cash coverage ratio for Lucas Company would be:

Cash Coverage Ratio = Cash Flow from Operating Activities / Interest Expense

Cash Coverage Ratio = $361,900 / $32,850 = 11.02

So, Lucas Company's cash coverage ratio is 11.02.