The Interest Coverage Ratio Measures the Degree of Protection a Company

question 108

True/False

The interest coverage ratio measures the degree of protection a company has from default on interest payments.

---

Definitions:

Inventory Loan

A loan that is secured by the inventory of a business, allowing the company to use its inventory as collateral.

Maturity Factoring

A financing method where a business sells its invoices to a factor at a discount but receives payment only when the customer pays the invoice at maturity.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount to raise immediate capital.

Inventory

A company's stock of the products available for sale to customers, as well as raw materials and work-in-progress that will eventually become finished goods.