Explain the interest coverage ratio, Managerial Accounting

Interest coverage ratio (or debt service ratio)

 Meaning: this ratio establishes a relationship among net profits before interest and taxes and interest on long debt.

Objective: the objective of computing this ratio is to calculate the debt servicing capacity of a firm so far as fixed interest on long term debt is concerned.

Components: there are two component by dividing the net profits before interest and taxes by interest on long term debt. This ratio is usually expressed as x number of times. In the form of a formula this ratio may be expressed.

 

Posted Date: 7/8/2013 8:32:12 AM | Location : United States







Related Discussions:- Explain the interest coverage ratio, Assignment Help, Ask Question on Explain the interest coverage ratio, Get Answer, Expert's Help, Explain the interest coverage ratio Discussions

Write discussion on Explain the interest coverage ratio
Your posts are moderated
Related Questions
Airlines give away millions of tickets each year through their frequent flyer programs, with the typical airline awarding a free ticket for each 25,000 miles flown on the airline.

What is Sunk cost A cost has been incurred in the past or sunk in the past and is not relevant to the particular decision making, is a sunk cost. If it is decided to replac

The least-cost method The process is described as follows: Assign as much as possible to the variable with the least unit cost in the whole tableau. (Ties are broken randomly).

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Cost Analysis purposes For purposes of cost analysis, the desegregation of the generic value chain into individual value activities should reflect three principles that are not

Transfer Pricing Methods Transfer pricing methods are concerned with the alternative means by which a transfer price can be set and its impact on organizations gauged. Emmanuel

Explain Programmer budgeting According to burkhead According to burkhead a program budget serves a different purpose than performance budget. A performance budget is useful fo

Case Study Labor standards Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The company is conside

The Rohr Company’s old equipment for making subassemblies is worn out. The company is considering two courses of action: (a) Completely replacing the old equipment with new equipme

Trinco Ltd (Trinidad & Tobago-T&T) has been negotiating a contract with a potential customer in Jamaica. Before the negotiations started the Jamaican company agreed to pay $10,000