The lower the interest coverage ratio, the more likely:
A)a default in payment will occur.
B)a business needs to borrow money.
C)a business will suffer a loss.
D)interest payments can be made.

Question

Quizplus · Accepted Answer

Interest coverage ratio is a measure of a company's ability to pay its interest expenses on outstanding debt. A lower interest coverage ratio indicates that a company is not generating enough income to cover its interest expenses, which increases the risk of defaulting on loan payments. Therefore, a lower interest coverage ratio is a sign of financial risk and increases the likelihood of default in payment.

The Lower the Interest Coverage Ratio, the More Likely