As the interest coverage ratio declines,the risk for creditors also declines.

Question

Quizplus · Accepted Answer

The statement is false. As the interest coverage ratio, which is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses, declines, it indicates that a company has less ability to pay its interest obligations. This increases the risk for creditors as they may be concerned about the company's ability to repay its debt.

As the Interest Coverage Ratio Declines,the Risk for Creditors Also