Explain the interest coverage ratio, Managerial Accounting

Assignment Help:

Interest coverage ratio (or debt service ratio)

 Meaning: this ratio establishes a relationship among net profits before interest and taxes and interest on long debt.

Objective: the objective of computing this ratio is to calculate the debt servicing capacity of a firm so far as fixed interest on long term debt is concerned.

Components: there are two component by dividing the net profits before interest and taxes by interest on long term debt. This ratio is usually expressed as x number of times. In the form of a formula this ratio may be expressed.

 


Related Discussions:- Explain the interest coverage ratio

What are the advantages of zero base budgeting, Advantages of zero base bud...

Advantages of zero base budgeting 1) it provides a basis for evaluating decision packages on the basis of benefit considerations 2) it reduces inefficiency and achieves high

What is budgetary control, What is Budgetary control Budgetary control...

What is Budgetary control Budgetary control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted fi

What is behind the wave of mergers in the banking industry, What is behind ...

What is behind the wave of mergers in the banking industry? A: Several economic factors have caused banking institutions to merge over the past several years. These factors inc

PRATICAL PROBLEM, The standard cost of chemical mixture ~ PQ’ is as follows...

The standard cost of chemical mixture ~ PQ’ is as follows: 40% of material P @ Rs. 400 per kg. 60% of material Q @ Rs. 600 per kg. A standard loss of 10% is normally anticipated in

Illustration of graphic analysis , Illustration of Graphic Analysis Th...

Illustration of Graphic Analysis The four steps of cost-volume-profit analysis can be employed to graph and study any cost-volume relationship. Suppose that you have been aske

Medical office accounting final project, John Doe, MD A Business Simulation...

John Doe, MD A Business Simulation This simulation covers the transactions completed by John Doe, MD, a medical service business, which began on July 1 of the current year. Dr. D

Transfer pricing with third party consequences, Transfer pricing with third...

Transfer pricing with third party consequences Transfer prices are used not only for internal record keeping and performance evaluation purposes. There are several settings

Recognition of the organization''s decision, Recognition of the Organizatio...

Recognition of the Organization's Decision Units and Decision Packages ZBB decision unit is an operating division for which decision packages are generated and analyzed. It ca

Illustration of coefficient of determination , Illustration of Coefficient ...

Illustration of Coefficient of Determination The production manager of XYZ Company is concerned about the apparent fluctuation in efficiency and wants to determine how labour c

prepare an income statement, Adm2341 manufactures and sells four different...

Adm2341 manufactures and sells four different products. The following data are extracted from the most recent financial statements:   Products

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd