If Sassycat, Inc. had gross profit of $35,000, interest expense $10,000, and operating expenses $20,000, then the interest coverage ratio would be 1.25

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Quizplus · Accepted Answer

The interest coverage ratio is calculated as EBIT (Earnings Before Interest and Taxes) divided by interest expense. In this case, EBIT is gross profit minus operating expenses, which is $35,000 - $20,000 = $15,000. Therefore, the interest coverage ratio is $15,000 / $10,000 = 1.5.