The Interest Coverage Ratio Is Computed by Dividing

question 143

Multiple Choice

The interest coverage ratio is computed by dividing:

• A)Operating income by annual interest expense.
• B)Net income by annual interest expense.
• C)Carrying value of bonds by cash interest payments.
• D)Earnings per share by the prime interest rate.

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Definitions:

Stock Market

A public market for buying, selling, and issuance of stocks of publicly held companies, facilitating equity investment and ownership.

Value

The economic worth of a good, service, asset, or company based on the benefits or returns it provides.

Pre-Tax Cost

The expense associated with purchasing or investing before any taxes are applied.

Yield To Maturity

The total return anticipated on a bond if it is held until the date of maturity, accounting for both interest payments and the principal repayment.