Series 79 practice questionmediumCoverage Ratios
Company X has EBIT of $25 million and interest expense of $5 million. Its interest coverage ratio is:
- A4x
- B5x✓ Correct answer
- C6x
- D7x
Explanation
Why B — 5x
Interest coverage equals EBIT divided by interest expense: $25 million ÷ $5 million = 5.0x. Therefore, B is correct.
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