The cash coverage ratio formula is: Cash Ratio = (Cash + Cash Equivalents) / Total Current Liabilities Typically, you may combine cash and equivalents on your balance sheet or list them separately.
Full Answer
What is the cash coverage ratio?
What is the Cash Coverage Ratio? The cash coverage ratio is useful for determining the amount of cash available to pay for a borrower's interest expense, and is expressed as a ratio of the cash available to the amount of interest to be paid.
How do you calculate cash coverage ratio on an income statement?
The formula for calculating the cash coverage ratio is:(Earnings Before Interest and Taxes (EBIT) + Depreciation Expense) ÷ Interest Expense = Cash Coverage Ratio.Total Revenue - Cost of Goods Sold - Operating Expenses = EBIT.($91,500 + $50,000) ÷ $12,000 = 11.79.
What is a good coverage ratio?
Analysts prefer to see a coverage ratio of three (3) or better. In contrast, a coverage ratio below one (1) indicates a company cannot meet its current interest payment obligations and, therefore, is not in good financial health.
How do you calculate the cash ratio?
How Do You Calculate Cash Ratio? The cash ratio is calculated by dividing cash by current liabilities. The cash portion of the calculation also includes cash equivalents such as marketable securities.
How do you calculate cash ratio in Excel?
Cash Ratio = (Cash + Cash Equivalent) / Total Current LiabilitiesCash Ratio = ($50,000 + $20,000) / $100,000.Cash Ratio = $0.7.
What does a 1.5 coverage ratio mean?
Understanding the Interest Coverage Ratio The lower the ratio, the more the company is burdened by debt expenses and the less capital it has to use in other ways. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable.
How is coverage calculated?
coverage = (read count * read length ) / total genome size.