One Criticism of the Interest and Fixed Charges Coverage Ratios

question 15

Essay

One criticism of the interest and fixed charges coverage ratios as measures of long-term solvency risk is that they use earnings rather than cash flows in the numerator.Detail how the interest coverage ratio and fixed charges coverage ratio are calculated.In addition,discuss why using earnings in the numerator is a problem and what method could be used to alleviate this problem.

Understand the calculation and interpretation of gross earnings.

Understand advanced financial calculations, including investments and retirement savings contributions.

Perform basic operations with percentages to analyze financial changes and investments.

Calculate and analyze average metrics in personal and business finance.

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Definitions:

Supervisors

Individuals in an organization responsible for overseeing the work of employees and ensuring that the work is completed efficiently and effectively.

Decertification Election

A vote by employees to determine whether they wish to remove their current union as their representative in collective bargaining.

Employees

Individuals who are hired to perform specific duties and tasks in exchange for compensation from an employer.

Bargaining Units

Workers grouped together by similar interests, who have a single labor union represent them in collective negotiation talks.