The fixed charge coverage ratio indicates the ability of a firm to meet its contractual obligations for interest, leases, and debt principal repayments out of its operating income.

Question

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The fixed charge coverage ratio is a financial ratio used to measure a company's ability to cover its fixed charges, including interest expenses, lease payments, and debt principal repayments with its operating income. Therefore, the statement is true.

The Fixed Charge Coverage Ratio Indicates the Ability of a Firm