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Cash Coverage, Inc. had net sales of $800,000 last year, and increased its retained earnings by $75,000 for the year after paying a dividend of $2 per share on 40,000 outstanding shares.  The tax rate for the company is 40%.  The company had cost of goods sold of $300,000 and its accumulated depreciation increased by $150,000. What is its cash coverage ratio?

Given,Net salesCost of goods soldRetained EarningsDividendDepreciationCash Coverage ratio =EBIT =Net IncomeTax RateEarnings before taxInterest =Cash Coverage ratio = 800,000300,000…