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
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.
Question : ---------- ratio is calculated by dividing the ‘profit before charging interest and income-tax’ by ‘fixed interest charges.
Question : Which factor of capital structure explains how many times EBIT can repay interest obligation.
Question : Which of the following ratios is also known as the working capital ratio?
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