Question

define financial coverage.How is it calculated?​

Answer 1

Answer:

The interest coverage ratio may be calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense during a given period by the company's interest payments due within the same period

Coverage Ratio Formula-

• Interest Coverage Ratio (ICR) = EBIT / Interest Expense.
• Debt Service Coverage Ratio (DSCR) = Net Operating Income / Total Debt Service.
• Asset Coverage Ratio (ACR) = (Total Tangible Assets – Short Term Liabilities) / Total Outstanding Debt.

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