How can the company increases it's interest coverage ratio ? Explain

Expert Solution

The interest coverage ratio refers to the ratio that is used for determining the number of times an organization can make the interest payment on its debt by its earnings before interest and taxes for a specific period of time that is usually one year. It is an ability of the organization for meeting its interest payment.

It is often used by the organization for evaluating its financial condition. A company with increased ICR is sustainable, whereas an organization with decreased ICR could counter the issue related to the liquidity. A good and enhanced interest coverage ratio is considered significant by both the investors and the market analysts as an organization could not grow or survive unless it could pay its interest on its existing debts. The few ways in which an organization could increase its interest coverage ratio are as follows:

· Increasing the net operating income

· Decreasing operating expenses

· Paying off some existing debt

· Decreasing the borrowing amount

keosha answered 2 months ago

Explain why a higher interest coverage ratio can also be a sign of weak financial management....

Explain why a higher interest coverage ratio can also be a sign of weak financial management. And reason that will lead to an increase in gross profit margin

How is interest coverage ratio impacted if a company acquires inventory through cash payments?

1)Sometimes called the coverage ratio, this ratio measures the risk that interest payments will not be...

1)Sometimes called the coverage ratio, this ratio measures the risk that interest payments will not be made if earnings decrease. a. Number of days' sales in inventory b. Times interest earned ratio c. Ratio of fixed assets to long-term liabilities d. Ratio of liabilities to stockholders' equity 2)The balance sheets at the end of each of the first two years of a company's operations indicate the following: Year 2 Year 1 Total current assets $600,000 $580,000 Total investments 80,000 40,000...

Explain what the annual debt service coverage ratio (ADSCR) and loan life coverage ratio (LLCR) are....

Explain what the annual debt service coverage ratio (ADSCR) and loan life coverage ratio (LLCR) are. How are these estimated and what are the differences between them? What will you do if the ADSCR are less than one in year 9 and 10 of the 20 years project?

1.The interest-coverage ratio is calculated as a) net income + taxes – interest - depreciation) ÷...

1.The interest-coverage ratio is calculated as a) net income + taxes – interest - depreciation) ÷ interest. b) (net income – taxes – interest – depreciation) ÷ interest. c) net income + taxes + interest + depreciation) ÷ interest. d) net income + interest + depreciation) ÷ interest. 2. All of the following transactions lead to temporary timing differences except a) the use of straight-line depreciation of accounting purposes. b) the recognition of dividend income for dividends received from another...

If the interest coverage ratio is too high, then the ROE is too low, Agree or...

If the interest coverage ratio is too high, then the ROE is too low, Agree or Not ? What the three factor affect ROE and how higher ROE lead to higher share price ?

What is a coverage ratio? Give an example. How is it used?

1. Explain the difference between the liquidity coverage ratio (LCR) and the net stable funding ratio...

1. Explain the difference between the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). 2. Why is it risky to rely on wholesale deposits for funding? 3. What was the nature of the funding risk problems of Ashanti Goldfields and Metallgesellschaft?

How does the reserve ratio change if the Fed increases the required reserve ratio? How does...

How does the reserve ratio change if the Fed increases the required reserve ratio? How does the currency-deposit ratio change if people decide to keep more of their money in cash rather than depositing it? If people decide to hold zero currency (cu→0, meaning the currency-deposit ratio goes to zero), what is the relationship between the money supply and the monetary base (what is the money multiplier)? If people decide to hold all of their money as currency and never...

can you explain how to answer this question? It's for a critical appraisal of an RCT, but...

can you explain how to answer this question? It's for a critical appraisal of an RCT, but I'm not sure what it's asking me to determine. 1. Is the literature review appropriate? Why or why not? CUES: Highlights conflicting literature? Highlights limitations to prior research?

Question