Which of the following ratios enables users to make an assessment of the affordability of borrowings?

Question

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Interest cover ratio measures the ability of a company to meet its interest payments on its debt obligations. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense. A higher interest cover ratio indicates that a company has a greater ability to meet its interest payments and is less likely to default on its debt obligations.

Which of the Following Ratios Enables Users to Make an Assessment