Current cash debt coverage ratio is a liquidity ratio that measures the relationship between net cash provided by operating activities and the average current liabilities of the company. It indicates the ability of the business to pay its current liabilities from its operations.
Formula:
It is computed by the following formula:
The two components of the formula are net cash provided by operating activities and average current liabilities. The net cash provided by operating activities is the net cash generated from its operations during a particular period. The average current liabilities are equal to opening liabilities plus closing liabilities divided by two.
Understanding your financial health is crucial, whether you’re an individual, a business, or an online entity such as the best casinos that accept Interac. One tool used to gauge this is the Current Cash Debt Coverage Ratio (CCDCR). This reveals a company’s ability to meet their obligations and provides insights into its liquidity and overall solvency.
CCDCR is calculated by dividing the net cash provided by operating activities by the average current liabilities. A high ratio implies better financial health, showing the business has a strong strategy in place, minimizing default risk, and attracting potential investors.
On the other hand, best online casinos that accept interac showcase the practical application of such financial management metrics. Interac is a perfect payment gateway for quick, hassle-free transactions without the need to reveal card details, fostering a secure platform to enjoy gaming. By using Interac, casinos are likely ensuring robust financial health by providing a seamless user experience, consequently generating more operations cash inflow.
Understanding metrics like CCDCR will help these casinos meet their obligations while the use of efficient payment methods like Interac can significantly boost their customer satisfaction and profits.
Both casino operators and players can therefore benefit substantially from understanding financial metrics and utilizing efficient payment solutions. Whether it’s improving operating efficiency, satisfying players with fast, secure transactions, or strategically planning for growth, the intersection of accounting, business management, and payment solutions is multifaceted and essential for success.
Example:
Suppose a company generated $55,000 cash from operations during the last year. The current liabilities at the beginning and at the end of the year were $45,000 and $60,000 respectively. The current cash debt coverage ratio would be computed as follows:
$55,000 / $52,500*
1.05
or
1.05 : 1
*($45,000 + $60,000)/2
Significance and interpretation:
A higher current cash debt coverage ratio indicates a better liquidity position. Generally a ratio of 1 : 1 is considered very comfortable because having a ratio of 1 : 1 means the business is able to pay all of its current liabilities from the cash flow of its own operations.
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