The Interest Coverage Ratio Indicates the Ability of a Firm

question 162

True/False

The interest coverage ratio indicates the ability of a firm to meet its contractual obligations for interest, leases, and debt principal repayments out of its operating income.

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Definitions:

Major Division

A significant separation or segmentation within an organization, market, or field of study, typically characterized by distinct functions, products, or specialties.

Sarbanes-Oxley Act

A United States federal law that was enacted in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations.

Lead Auditor

A senior auditor responsible for managing the audit team and overseeing the audit process to ensure accuracy and compliance.

Close Corporation

A type of corporation that is often privately held and has a small number of shareholders. The corporate stock is not publicly traded and is subject to greater restrictions on its transferability.