Coverage ratio, Financial Management

Assignment Help:

Coverage ratios give the relationship between the financial charges of a firm and its ability to service them. The four most commonly used coverage ratios are:

  • EBIT interest coverage ratio

  • EBITDA interest coverage ratio

  • Funds from operations/total debt ratio

  • Free operating cash flow/ total debt ratio.

EBIT stands for "Earnings Before Interest and Taxs". EBIT interest coverage ratio is nothing but EBIT divided by the annual interest expenses.

EBITDA stands for "Earnings Before Interest, Taxes, Depreciation, and Amortization." The EBITDA interest coverage ratio is got by dividing EBITDA with annual interest expense.

Funds from operations includes net income plus the following: depreciation, amortization, deferred income taxes, and other non-cash items. Free operating cash flows are different from rating agency to rating agency.


Related Discussions:- Coverage ratio

Determine the limitations of trade receivable day ratio, Determine the Limi...

Determine the Limitations of trade receivable day's ratio Year-end trade receivables may not be representative of the year. Credit sales are VAT exclusive in the Incom

Money market mutual fund, Money Market Mutual Fund Even as the Mutual F...

Money Market Mutual Fund Even as the Mutual Funds show a promise of becoming a major instrument of household savings, another concept which is being talked about and waiting to

305, I have an assignment due today and needs some help

I have an assignment due today and needs some help

Discount Pricing, Discount Pricing The T-bills are issued at a discount...

Discount Pricing The T-bills are issued at a discount to face value and hence have no coupon. Commission rates on round lots generally range from $12.50 to $25.00 per $1 mil

Types of warrants, Types of Warrants The warrants can be classified int...

Types of Warrants The warrants can be classified into different types. They are: Detachable Warrants These warrants are issued with most debentures, like convertible o

Need for simulation, Need for Simulation If the mathematical model set...

Need for Simulation If the mathematical model set up could always be optimized by the analytical approach, then, there would be no need for simulation. Only when interrelation

Determine the key factor affecting financing costs, Determine The key facto...

Determine The key factor affecting financing Costs Because cost of capital is measured under the assumption that both firm's asset structure and its capital (financial) structu

State the several goals for the organisation, State the several goals for t...

State the several goals for the organisation As there could be several goals for the organisation, we must try and summarise theorganisational goals in financial terms so that

OPERATING CYCLE, discuss the applicability of operation cycle in avegetab...

discuss the applicability of operation cycle in avegetable growing business

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd