The fixed-charge coverage ratio includes all of the following in the denominator EXCEPT ____ .
A) lease payments
B) preferred dividends before tax
C) Before-tax sinking fund
D) common stock dividends

Question

Quizplus · Accepted Answer

The fixed-charge coverage ratio only includes fixed expenses in the denominator, such as interest expenses, lease payments, before-tax sinking fund, and preferred dividends before tax. Common stock dividends are not considered a fixed expense and are therefore not included in the denominator.

The Fixed-Charge Coverage Ratio Includes All of the Following in the Denominator