Question

Daredevil Company reports the following info:

Net Cash provided by operating activities - 230532
Average Current Liabilities - 142983
Average Long Term Liabilities - 112635
Dividends declared - 60301
Capital Expenditures - 113341
Payments of Debt - 36950

Daredevil's cash debt coverage ratio is ________ (enter your answer to two decimal places, and don't convert it to a percent. For example, .76)

Answer 1

The cash debt coverage ratio for Daredevil Company is calculated to be 0.90 by dividing the Net Cash Provided by Operating Activities by the sum of Average Current Liabilities and Average Long Term Liabilities.

Step-by-step explanation:

The question is asking to calculate the cash debt coverage ratio, which is a liquidity ratio that indicates the ability of a company to repay its debt from operating cash flow. The formula to calculate the cash debt coverage ratio is:

Cash Debt Coverage Ratio = Net Cash Provided by Operating Activities / Average Total Liabilities

Average Total Liabilities is calculated by taking the sum of Average Current Liabilities and Average Long Term Liabilities. In this case, the total is 142983 + 112635, which gives us 255618.

Next, we use the net cash provided by operating activities (230532) and divide by the average total liabilities:

Cash Debt Coverage Ratio = 230532 / 255618

Upon performing the division, we get a cash debt coverage ratio of approximately 0.90 (rounded to two decimal places).