Which of the following statements correctly describe interest cover?
A) The inverse of interest cover is capital gearing.
B) Interest cover = (Profit before interest and tax)/(Interest charges)
C) Interest cover = (Interest charges)/(Profit before interest and tax)
D) The inverse of interest cover is income gearing.

Question

Quizplus · Accepted Answer

Interest cover is a ratio used to assess a company's ability to meet interest payments on its debt. It is calculated by dividing profit before interest and tax by interest charges. Therefore, statement B correctly describes interest cover. Statements A, C, and D are incorrect. The inverse of interest cover is not capital gearing or income gearing, as these terms are not related to the concept of interest cover.

Which of the Following Statements Correctly Describe Interest Cover