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Series 79: Collection, Analysis & Evaluation of Data
Series 79 practice questionmediumCoverage Ratios

Company X has EBIT of $25 million and interest expense of $5 million. Its interest coverage ratio is:

  1. A4x
  2. B5x✓ Correct answer
  3. C6x
  4. D7x
Explanation

Why B5x

Interest coverage equals EBIT divided by interest expense: $25 million ÷ $5 million = 5.0x. Therefore, B is correct.

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