Question
A company’s Interest Coverage Ratio drops from 5.0x to 1.1x over a two-year period, while its revenue remains stable. Which of the following scenarios best explains this structural decline?
An Interest Coverage Ratio close to 1.0x means operating profits barely cover mandatory interest expenses. If revenue is unchanged, this drop is driven by lower operating margins (dropping EBIT) or higher interest payments due to increased debt loads or higher interest rates.More Financial Management Questions
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