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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
Calculate the Interest Coverage Ratio if EBIT is $250,000 and interest expense is $50,000.
💡 Hint: Use the formula: EBIT divided by interest expense.
Question 2
Easy
What does an Interest Coverage Ratio of 1.2 indicate?
💡 Hint: Think about whether earnings exceed interest expense.
Practice 4 more questions and get performance evaluation
Interactive Quizzes
Engage in quick quizzes to reinforce what you've learned and check your comprehension.
Question 1
What is the formula for the Interest Coverage Ratio?
💡 Hint: Remember the key components of the ratio.
Question 2
A higher Interest Coverage Ratio signifies what?
- Higher risk of insolvency
- Lower ability to pay interest
- Greater ability to cover interest payments
💡 Hint: Consider what a high ratio implies relative to obligations.
Solve 1 more question and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
A company's EBIT is $850,000, and its interest expenses are $400,000. Calculate the Interest Coverage Ratio and analyze its significance.
💡 Hint: Break down EBIT in relative terms to interest payments.
Question 2
A tech firm has a considerable amount of debt with an EBIT of only $200,000 and interest payments of $300,000. Discuss the implications of these figures.
💡 Hint: Evaluate how ongoing operations could be impacted.
Challenge and get performance evaluation