One Criticism of the Interest and Fixed Charges Coverage Ratios

question 56

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 and what method could be used to alleviate this .

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Definitions:

Impaired Physical Mobility

A reduction in the ability to move or perform physical activities in a normal manner, often due to injury, disease, or a physical condition.

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Legally Questionable

Actions or situations that may not be explicitly illegal but are morally or ethically dubious and potentially could lead to legal consequences.

Collaborative Problem

A challenge that requires the collective effort and expertise of multiple individuals or groups to find a solution.