Question

The cash coverage ratio is used to evaluate the:Liquidity of a firmSpeed at which a firm generates cashLength of time that a firm can pay its bills if no additional cash becomes availableAbility of a firm to pay the interest on its debtRelationship between the firm's cash balance and its current liabilities

Answer 1

Answer:

The correct answer is letter "C": Ability of a firm to pay the interest on its debt.

Explanation:

The cash coverage ratio is a metric that measures a company's ability to pay its financial obligations. Generally, the higher the coverage ratio the better for the business to meet its debt obligations. It is best to compare coverage ratios of companies in the same industry or sector in the economy. Comparisons across industries are not useful as companies in different industries use debt in different ways.