Answer-first summary for fast verification
Answer: 20.6%.
## Explanation The cash flow debt coverage ratio measures a company's ability to repay its debt from operating cash flows. The formula is: **Cash Flow Debt Coverage Ratio = CFO / Total Debt** Where: - CFO = Cash flow from operating activities - Total Debt = Total debt at the end of the year From the given data: - CFO = 105.9 million CAD - Total Debt = 512.8 million CAD **Calculation:** Cash Flow Debt Coverage Ratio = 105.9 / 512.8 = 0.2065 or 20.65% **Why this is correct:** 1. The cash flow debt coverage ratio uses CFO (not free cash flow or other measures) 2. It uses total debt at the end of the period (not average debt) 3. The other items in the table (cash flow from investing, financing, interest paid, taxes paid) are not relevant for this specific ratio **Verification:** 105.9 ÷ 512.8 = 0.2065 ≈ 20.6% Therefore, the correct answer is **20.6%** (Option A).
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An analyst gathers the following information about a company:
| Item | Canadian Dollars (millions) |
|---|---|
| Cash flow from operating activities (CFO) | 105.9 |
| Cash flow from investing activities | (11.8) |
| Cash flow from financing activities | 46.5 |
| Net change in cash for the year | 140.6 |
| Interest paid (included in CFO) | 22.4 |
| Taxes paid (tax rate of 30%) | 18.0 |
| Total debt, end of year | 512.8 |
The cash flow debt coverage ratio for the year is closest to:
A
20.6%.
B
23.7%.
C
27.4%.
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