Question

Current liability coverage ratio demonstrates whether a company is generating enough cash from operations to pay debts due in less than a year's time. What is its formula?

Answer 1

The formula for calculating the current liability coverage ratio is Cash from Operations divided by Current Liabilities. This ratio measure a company's ability to generate enough cash to cover its debts due within a year.

Step-by-step explanation:

The formula for calculating the current liability coverage ratio is:

Current Liability Coverage Ratio = Cash from Operations / Current Liabilities

The Current Liability Coverage Ratio measures a company's ability to generate enough cash from its operations to cover its debts that are due within a year. It is an important metric for evaluating a company's liquidity and financial health. For example, if a company has a current liability coverage ratio of 2, it means that its cash from operations is twice the amount of its current liabilities.