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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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