Final answer:
Daredevil Company's cash debt coverage ratio is calculated by dividing the net cash provided by operating activities ($231,347) by the sum of the average current liabilities ($148,100) and average long-term liabilities ($117,701), which results in a cash debt coverage ratio of 0.87.
Step-by-step explanation:
The cash debt coverage ratio is a liquidity ratio that measures the ability of a company to repay its total debt from cash generated from operating activities. This ratio is calculated by dividing the net cash provided by operating activities by the average total liabilities. Average total liabilities is the sum of average current liabilities and average long-term liabilities.
In Daredevil Company's case, the cash debt coverage ratio can be calculated as follows:
- Net Cash provided by operating activities = $231,347
- Average Current Liabilities = $148,100
- Average Long Term Liabilities = $117,701
The average total liabilities would be:
Average Current Liabilities + Average Long Term Liabilities = $148,100 + $117,701 = $265,801
Now, to calculate the cash debt coverage ratio:
Net Cash provided by operating activities ÷ Average Total Liabilities = $231,347 ÷ $265,801 = 0.87 (rounded to two decimal places)
Therefore, Daredevil's cash debt coverage ratio is 0.87.