The Interest Coverage Ratio Measures the Ability of the Company

question 12

Multiple Choice

The interest coverage ratio measures the ability of the company to

• A) meet interest payments as they are due.
• B) turn over inventory.
• C) collect overdue accounts.
• D) earn a profit.

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Definitions:

Compounded Monthly

Compounded monthly refers to the process where interest is calculated and added to the principal sum every month, effectively increasing the total amount at a quicker pace.

Amortization Period

The total time period over which a loan or mortgage is scheduled to be paid off, often through regular payments.

Compounded Quarterly

Interest on an investment or loan is calculated and added to the principal once every three months.

Monthly Payment

A specified amount paid every month, typically as part of a loan repayment plan.