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SSC Audit Tax Finance P-II QUESTION #6187
Question 1
Why is the 'Cash Coverage Ratio' typically higher than the 'Interest Coverage Ratio (TIE)'?
  • It excludes interest payments.
  • It includes non-cash expenses like depreciation in the numerator.✔️
  • It is calculated after taxes.
  • It uses market value instead of book value.
Correct Answer Explanation
Cash Coverage Ratio adds depreciation (a non-cash expense) back to EBIT, increasing the numerator relative to the TIE ratio [cite: 39].