Which of the Following Statements About the Interest Coverage Ratio

question 50

Multiple Choice

Which of the following statements about the interest coverage ratio is NOT true?

• A) The interest coverage ratio is calculated as (earnings before interest and tax)/ (interest expense).
• B) The interest coverage ratio indicates the degree to which commitment to pay interest on debts is covered by the company's ability to generate profit.
• C) A low coverage ratio may be a warning of solvency problems.
• D) A high interest coverage ratio indicates the company is not operating at sufficient profitability levels.