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

Ask an Expert

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

Write your message here..

Related Questions

Asset securitisation, The emerging financial scenario has made a fierce com... The emerging financial scenario has made a fierce competition among the companies to raise funds by innovative financial products by the capital and or money markets. Moreover sour

Credit evaluation, One of the significant elements of credit management is ... One of the significant elements of credit management is the assessment of the credit risk of the customer.  As assessing risk two kind of errors arise that are as follows. Type

FIFO, I WANT TO KNOW THE RULES FOR DOING LIFO AND FIFO I WANT TO KNOW THE RULES FOR DOING LIFO AND FIFO

Explain product cost, Explain product cost Product costs are those cost... Explain product cost Product costs are those costs which are associated with and directly identifiable with the product. In other words, which are assigned to the product are p

Manufacturing Budget Analysis, Tom Emory and Jim Morris strolled back to th... Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company''s

Choosing order quantity , CHOOSING ORDER QUANTITY (SIZE—PROBLEM) The ob... CHOOSING ORDER QUANTITY (SIZE—PROBLEM) The objective of inventory decisions is usually to minimize total inventory costs to the company. Costs are ascribed to all elements whic

Determine the total labour variance, Problem: Fancy Foods Ltd uses a st... Problem: Fancy Foods Ltd uses a standard costing system to control its material and labour costs. The standard costs for January 2007 were as follows. Standard Costs Materi

Industrial Grinders, accepted#Regarding the Overhead costs, these are alloc... accepted#Regarding the Overhead costs, these are allocated based on Direct Labor;

Operating cycle period, Period of operating cycle implies that total sum of... Period of operating cycle implies that total sum of number of days included in the various stages of operation commencing from the purchase of raw materials and ending along with c

MAKE OR BUY DECISIONS , MAKE OR BUY DECISIONS (NO LIMITING FACTORS) The... MAKE OR BUY DECISIONS (NO LIMITING FACTORS) The choice between making and buying a given component is one which is likely to face all businesses at some time.  It is often one