📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    Question

    The primary purpose of calculating the 'Interest

    Coverage Ratio' is to assess a company's ability to pay:
    A Its long-term debt Correct Answer Incorrect Answer
    B Its dividend obligations Correct Answer Incorrect Answer
    C Its interest expenses from its earnings Correct Answer Incorrect Answer
    D Its tax liabilities Correct Answer Incorrect Answer
    E Its accounts payable Correct Answer Incorrect Answer

    Solution

    The Interest Coverage Ratio (EBIT / Interest Expense) measures how easily a company can pay interest on its outstanding debt from its operating earnings. A higher ratio indicates a greater ability to meet interest obligations.

    Practice Next
    More Accounts Questions
    ask-question