Which of the Following Statements About the Interest Coverage Ratio

question 2

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.

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Definitions:

Pretending

is the act of simulating or giving the appearance of a particular state, condition, or attribute, often to deceive or for playful purposes.

Common Goals

Shared objectives or aims among a group of individuals or within an organization that guide collective efforts and actions.

Mutually Desirable

A situation or agreement that is welcomed and beneficial to all parties involved.

Indirect Conflict Management

A strategy to address conflict by using third parties, avoidance, or other methods that do not involve direct confrontation.