Current cash debt coverage ratio: It is a liquidity ratio which measures the relationship between net cash provided from operating activities and average current liabilities during the year. This ratio would be helpful in indicating the ability of the business to pay off its current liabilities from its ongoing business operations. Current cash debt coverage ratio = Net cash provided by operating activities Average c urrent liabilities Cash debt coverage ratio: It is a solvency ratio which defines the relationship between operating cash flow to its total liabilities. This ratio would be helpful in indicating the ability of the business to pay off the total liabilities from the total business operations. Cash debt coverage ratio = Net cash provided by operating activities Average t otal liabilities To Compute: Current cash debt coverage of H Company and TR Industries.

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Chapter 12, Problem 12.2BYP

(a)

(1)

To determine

Current cash debt coverage ratio:

It is a liquidity ratio which measures the relationship between net cash provided from operating activities and average current liabilities during the year. This ratio would be helpful in indicating the ability of the business to pay off its current liabilities from its ongoing business operations.

Current cash debt coverage ratio = Net cash provided by operating activitiesAverage current liabilities

Cash debt coverage ratio:

It is a solvency ratio which defines the relationship between operating cash flow to its total liabilities. This ratio would be helpful in indicating the ability of the business to pay off the total liabilities from the total business operations.

Cash debt coverage ratio = Net cash provided by operating activitiesAverage total liabilities

To Compute: Current cash debt coverage of H Company and TR Industries.

(b)

To determine

To conclude: Decision with regards to management of cash from the above data.

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