QUESTION 19 Use the following information for LA Theaters to

QUESTION 19 Use the following information for LA Theaters to answer the question Financial ratios for the years ended December 31, 2016 2015 66.171.7 54.4 64.8 0.6 0.2 3.0 1.2 0.9 0.8 0.60.2 Debt ratio (%) Long-term debt to total capital (%) Cash flow Profitability Gross profit 62.0 61.7 4.4 1.2 Net profit Cash flow Return on 170 14 asse (%) 10.2 0.5 Which statement below is true with regard to the coverage ratios of LA Theaters? LA Theaters can cover interest payments with cash in both 2016 and 2015. LA Theaters is having trouble paying for fixed charges due to their low coverage ratios. ?LA Theaters does not cover interest payments as well with cash compared to profits D LA Theaters could not make interest payments due to the net loss in 201

Solution

Answer

A ) LA theaters can cover interest payment with cash both in 2015 and 2016

in that case the interest has to been covered with the cash of both 2 years of 2015 and 2016