The interest coverage ratio is equal to:
A)EBIT/interest.
B)interest/EBIT.
C)(debt + equity)/EBIT.
D)EBIT * interest.

Question

Quizplus · Accepted Answer

The interest coverage ratio is calculated by dividing EBIT (earnings before interest and taxes) by interest expense. This ratio shows whether a company's earnings are sufficiently covering its interest payments. A higher ratio indicates a lower risk of default on debt, while a lower ratio suggests a higher risk of default.

The Interest Coverage Ratio Is Equal To