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    Question

    ABC Inc’s Income statement shows a sale of Rs 2000,

    COGS of Rs 800, Pre-Interest Operating Expenses of Rs 600 and Interest expenses of Rs 200. Interest Coverage ratio of ABC Inc is:
    A 2 times Correct Answer Incorrect Answer
    B 3 times Correct Answer Incorrect Answer
    C 4 times Correct Answer Incorrect Answer
    D 5 times Correct Answer Incorrect Answer
    E 1.5 times Correct Answer Incorrect Answer

    Solution

    Interest Coverage Ratio = EBIT/Interest EBIT = Sales – COGS – Pre interest operating expenses = 2000 – 800 – 600 = 600 600/200 = 3

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