Wize University Introduction to Financial Accounting Textbook > The Cash Flow Statement
Cash Total Debt Coverage Ratio
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Cash Total Debt Coverage Ratio
The cash total debt coverage ratio is a solvency ratio that measures how many times the company can afford to pay off its total liabilities using cash earned from its primary operations, meaning without having to liquidate other assets.
Interpreting the Ratio
- A higher ratio is a sign of solvency and financial strength
- A low ratio is a sign of possible solvency issues and financial weakness.
- Could be a sign that the company will have difficulty paying liabilities in the future
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Example: Cash Total Debt Coverage Ratio
Compute and interpret the cash total debt coverage ratio for the year ended September 28, 2019. Do not round your work, round final answer to 2 decimal places.
Practice: Cash Total Debt Coverage Ratio
Compute the cash total debt coverage ratio for the year 2020. Do not round your work, round your final answer to 2 decimal places and enter you answer in decimal form.
