Determine Packard's cash debt coverage ratio given the provided information:
Packard Corporation reports the following information:
Net cash provided by operating activities
Average current liabilities
Average long-term liabilities
Dividends declared
Capital expenditures
Payments of debt
\[
\begin{array}{l}
\$ 762,500 \\
120,000 \\
32,500 \\
60,000 \\
537,500 \\
35,000
\end{array}
\]
Packard's cash debt coverage is
a. 5.00
b. 6.35
c. 3.50
d. 2.31
Answer
\( \boxed{\text{Cash debt coverage ratio} = 5.00} \)
Step 1 ：\( \text{Average total liabilities} = \text{Average current liabilities} + \text{Average long-term liabilities} \)
Step 2 ：\( \text{Average total liabilities} = 120,000 + 32,500 \)
Step 3 ：\( \text{Average total liabilities} = 152,500 \)
Step 4 ：\( \text{Cash debt coverage ratio} = \frac{\text{Net cash provided by operating activities}}{\text{Average total liabilities}} \)
Step 5 ：\( \text{Cash debt coverage ratio} = \frac{762,500}{152,500} \)
Step 6 ：\( \boxed{\text{Cash debt coverage ratio} = 5.00} \)
