Question

Use the following information to answer this question.

Windswept, Inc.
2017 Income Statement
($ in millions)
Net sales $9,500
Cost of goods sold 7,540
Depreciation 320
Earnings before interest and taxes $1,640
Interest paid 93
Taxable income $1,547
Taxes 464
Net income $1,083
Windswept, Inc.
2016 and 2017 Balance Sheets
($ in millions)
2016 2017 2016 2017
Cash $270 $285 Accounts payable $1,470 $1,625
Accounts rec. 1,080 980 Long-term debt 1,160 1,430
Inventory 1,680 1,670 Common stock 3,340 3,040
Total $3,030 $2,935 Retained earnings 490 740
Net fixed assets 3,430 3,900
Total assets $6,460 $6,835 Total liab.& equity $6,920 $7,350
What is the cash coverage ratio for 2017?
a. 4.43 times.
b. 3.11 times.
c. 16.75 times.
d. 667 times.

Answer 1

21.08 times

Step-by-step explanation:

Calculation to determine the cash coverage ratio for 2017

Using this formula

Cash coverage ratio=(Earnings before interest and taxes+Depreciation)/Interest paid

Let plug in the formula

Cash coverage ratio= ($1,640+$320)/$93

Cash coverage ratio=$1,960/$93

Cash coverage ratio = 21.08 times

Therefore the cash coverage ratio for 2017 is 21.08 times