Wize University Introduction to Financial Accounting Textbook > Financial Statement Analysis
Cash Current Debt Coverage Ratio
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Cash Current Debt Coverage Ratio
This cash current debt coverage ratio is a liquidity ratio that measures how many times a company can pay its current liabilities using cash from operations.
Interpreting the Ratio
- Ratio > 1: This means the company earned enough cash from its primary operations to pay its current liabilities.
- Higher ratio means better liquidity
- Ratio < 1: This means that the company will require non-operating cash flows or cash from previous periods to pay its current liabilities.
- Lower ratio means weaker liquidity.
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Example: Cash Current Debt Coverage Ratio
Compute and interpret the cash current debt coverage ratio for the year ended September 28, 2019.
Practice: Cash Current Debt Coverage Ratio
Compute the cash current 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.
Compute the cash current debt coverage ratio for 2020.