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The Docksider has net income for the most recent year of $24,650 and a combined tax rate of 24 percent. The firm paid $1,800 in total interest expense and deducted $2,900 in depreciation expense. What was the cash coverage ratio for the year

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abiolataiwo2015

Answer:

20.63 times

Explanation:

Calculation to determine What was the cash coverage ratio for the year

First step is to calculate the Earnings before taxes

Earnings before taxes = $24,650 / (1 - .24)

Earnings before taxes = $24,650/.76

Earnings before taxes = $32,434

Second step is to calculate the Earnings before interest and taxes

Earnings before interest and taxes = $32,434 + 1,800

Earnings before interest and taxes = $34,234

Now let calculate the Cash coverage ratio

Cash coverage ratio = ($34,234 + 2,900) / $1,800

Cash coverage ratio=$37,134/$1,800

Cash coverage ratio = 20.63 times

Therefore the cash coverage ratio for the year will be 20.63 times

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