A Measure of a Company's Financial Flexibility Is the

question 45

Multiple Choice

A measure of a company's financial flexibility is the

• A) cash debt coverage ratio.
• B) current cash debt coverage ratio.
• C) free cash flow.
• D) cash debt coverage ratio and free cash flow.

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Definitions:

Implicit Interest Rate

Implicit interest rate is the interest rate implied in the terms of a lease or loan, calculated based on the initial amount and the future payments or receipts.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.

Salvage Value

The estimated resale value of an asset at the end of its useful life, considered in depreciation calculations.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, representing the asset's expense.