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Question : ‘Debt Service Ratio’ is termed as -----
Option 1: Current ratio
Option 2: Quick ratio
Option 3: Interest Coverage Ratio
Option 4: None of the above
Answer (1)
Correct Answer: Interest Coverage Ratio
Solution : Answer = Interest Coverage Ratio
The interest coverage Ratio is also termed the Debt Service Ratio. This ratio measures a company's ability to meet its interest payments on its debts. It is calculated by dividing the company's earnings before interest and taxes (EBIT) by its interest expenses. A higher interest coverage ratio indicates that a company has more financial flexibility to meet its debt obligations, which is favourable for investors and creditors.
Hence, the correct option is 3.
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