Debtors are interested in the number of times interest charges are earned because they want to
A)know what rate of interest the corporation is paying
B)have adequate protection against a potential drop in earnings jeopardizing their interest payments
C)be sure their debt is backed by collateral
D)know the tax effect of lending to a corporation

Question

Quizplus · Accepted Answer

Debtors want to know the number of times interest charges are earned, also known as interest coverage ratio, to ensure that the corporation is generating enough earnings to cover their interest payments. This provides them with protection against potential default or inability to pay interest.

Debtors Are Interested in the Number of Times Interest Charges