Question : Which factor of capital structure explains how many times EBIT can repay interest obligation.
Option 1: Cash flow position
Option 2: Interest coverage ratio
Option 3: Return on investment
Option 4: Debt service coverage ratio
Answer (1)
22nd Jan, 2024
Correct Answer: Interest coverage ratio
Solution : Interest coverage ratio refers to number of times earning for interest and taxes of a company covers the interest obligation. ICR explains how many times EBIT can repay interest obligation.
Hence, option B is correct.
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