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:

Comparable Units

Units or measures that are similar enough in key aspects to be used in comparisons or evaluations.

Certificates of Deposit

A savings certificate with a fixed maturity date and specified fixed interest rate that is issued by banks and is insured by the Federal Deposit Insurance Corporation (FDIC) up to a certain amount.