8.
Interest coverage ratio of 6 indicates
Solomon
Answers
The interest coverage ratio measures how many times a company can cover its current interest payment with its available earnings. In other words, it measures the margin of safety a company has for paying interest on its debt during a given period.
Answer:
if the interest coverage ratio is 6, this means the ability to pay the interest on the debt 6 times in an accounting year.
Explanation:
The interest coverage ratio is a debt and profitability ratio used to determine how a company can easily pay interest on its outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes by its interest expense during a given period.
An interest coverage ratio of 1.5 be the minimum acceptable level, two or better is preferred for analysts and investors. For companies with historically more volatile revenues, the interest coverage ratio may not be considered good unless it is well above three.
A higher interest coverage ratio indicates stronger financial health the company is more capable of meeting interest obligations.
A low ratio is a strong indicator that a company may default on its loan payments.