Answer
Step1:
Calculation of free cash flows:
Cash provided by operations is 405,000 dollars,
Capital expenditures are 200,000 dollars,
Cash dividends are 0 dollars.
By substituting these values in the cash flow formula:
Free cash flow = 405,000 - 200,000-0 = -205,000.
Free cash flows = 205,000 dollars
Step2:
Calculation of current cash to debt coverage ratio:
Cash provided by operations is 408,000 dollars
Average current liabilities are 150,000 dollars.
By substituting these values in the current cash to debt coverage ratio:
Cash to debt coverage ratio = 405,000/150,000 = 2.7:1
Current Cash to debt coverage ratio is = 2.7:1
Step3:
Calculation of cash debt coverage ratio:
Cash provided by operations is 405,000 dollars,
Average current liabilities are 225,000 dollars.
By substituting these values in the above formula, we get the cash debt coverage ratio:
Cash debt coverage ratio =405,000/225,000 = 0.14: 1
Cash debt coverage ratio = 0.14:1
Work Step by Step
Step1:
Formula for free cash flow is as below:
Free cash flow = Cash provided by operations - Capital expenditure - Cash dividends
Step2:
Formula for cash to debt coverage ratio is as below:
Current Cash to debt coverage ratio = Cash provided by operations/Average current liabilities
Step3:
Formula for cash debt coverage ratio is as below:
Cash debt coverage ratio = Cash provided by operations/Average current liabilities
