If the Cash Coverage Ratio Exceeds the Times Interest Earned

question 51

Multiple Choice

If the cash coverage ratio exceeds the times interest earned ratio,then the firm has:

• A) a positive cash flow.
• B) depreciable assets.
• C) no long-term debt.
• D) short-term debts.

---

Definitions:

Lease Capitalization Criteria

The standards or requirements used to determine whether a lease should be recorded as an asset and liability on the balance sheet.

Operating Leases

Leasing agreements where the lessor retains ownership of the asset, and the lessee pays for the right to use the asset for a specific period without gaining ownership.

Off-Balance Sheet Financing

Off-balance sheet financing involves raising funds or incurring liabilities that are not recorded on the company's balance sheet, often to improve financial ratios.

Lease Payments

Lease payments are the regular payments made by a lessee to a lessor for the use of an asset, such as property or equipment, under a lease agreement.