The best financial ratio to determine a company's ability to pay debt is the operating profit margin.

Question

Quizplus · Accepted Answer

The best financial ratio to determine a company's ability to pay debt is the interest coverage ratio. This ratio measures the company's ability to make interest payments on its debt by comparing its earnings before interest and taxes (EBIT) to its interest expense. The operating profit margin measures the company's operating profitability and does not directly assess its ability to pay debt.

The Best Financial Ratio to Determine a Company's Ability to Pay