What do coverage ratios demonstrate?
A) How a firm is expected to handle current asset balances.
B) Debt management of the firm and ability to meet financial obligations.
C) Profit margin of the firm.
D) The return on assets of the firm.

Question

Quizplus · Accepted Answer

Coverage ratios, such as the debt service coverage ratio and interest coverage ratio, demonstrate a firm's ability to manage its debt and meet financial obligations. This is important in assessing the financial health and stability of the firm.

What Do Coverage Ratios Demonstrate