Cash Coverage ratio indicates if a firm has enough cash to pay of its interest expenses. The ideal ratio to be maintained by a firm is 1:1. This can be given by the following formula:
Cash Coverage Ratio=![\frac{Earnings before Interest and Tax+Depreciation }{Interest Expense}](https://tex.z-dn.net/?f=%5Cfrac%7BEarnings%20before%20Interest%20and%20Tax%2BDepreciation%20%7D%7BInterest%20Expense%7D)
Cash Coverage Ratio=![\frac{215600-124800+11400}{3600}](https://tex.z-dn.net/?f=%5Cfrac%7B215600-124800%2B11400%7D%7B3600%7D)
Cash Coverage Ratio=28.38
Assumption: Cost includes Depreciation, thus depreciation is added back, To find Cash Profits before Interest and Taxes.
Answer:
Option A
Explanation:
Firms treat Weighted average cost of capital(WACC) as the discount rate to calculate the net present value of a business and to evaluate investments that are most essential for capital budgeting.
Answer: B. Compounding
Explanation:
COMPOUNDING is a situation where the earnings on assets, i.e interest, are reinvested along with the original principal (amount) to make even more earnings.
More earnings will accumulate simply because the earnings are now being made on both the original amount as well as the reinvested amount which is simply what Christina is doing.
Answer: increase; decrease
Explanation:
Assuming that both curves are of the same steepness, when the demand increases slightly, it will shift slightly to the right which will increase prices. However, should the supply significantly reduce, it would shift the Supply Curve significantly to the left. The new Equilibrium will see a higher price and a lower Quantity.
Explaining it in the real world. If people are now demanding more of a good but at the same time the number of goods reduced, that would cause a price increase because too many people are chasing too few goods. Also, the Supply decreased which translates to a lower Quantity produced.
If however, both supply has decreased by the same rate demand increased, the price would go up but the effect on the quantity of the good will be uncertain.