A Company's Ability to Pay the Interest on Its Debt

question 113

True/False

A company's ability to pay the interest on its debt is often measured with the interest coverage ratio.

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Definitions:

Municipal

Relating to a city or town or its governing body.

Sinking Fund

A reserve fund established by a company to set aside revenue over time for the purpose of paying off debt or replacing a major asset in the future.

Bond Issue

The act of a borrower issuing bonds to raise money from investors willing to lend them money for a certain amount of time.

Pay Off Debt

The process of fully repaying borrowed money, including the principal amount and any accrued interest.