Coverage ratios, like times interest earned and cash coverage ratio, allow
A) a company's management to assess how well they meet short-term liabilities.
B) a company's shareholders to assess how well the company will meet its short-term liabilities.
C) a company's creditors to assess how well the company will meet its interest obligations.
D) a company's creditors to assess how well the company will meet its short-term liabilities other than interest expense.

Question

Quizplus · Accepted Answer

Coverage ratios like times interest earned and cash coverage ratio help creditors assess how well a company will meet its interest obligations. These ratios indicate the company's ability to generate enough cash to cover its interest expense, which is important information for creditors evaluating the risk of lending to the company.

Coverage Ratios, Like Times Interest Earned and Cash Coverage Ratio