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An interest coverage ratio is ratio that equals income before interest and taxes, divided by interest; also called times-interestearned ratio. The ratio reveals the number of times interest is covered by earnings. A potential creditor would like to see a high ratio because it indicates that the company is able to meet its interest obligations with room to spare
A ratio which determines the ability of the company to pay interest on the debt taken. It is calculated by dividing the Earnings before Interest and Tax with Interest Expenses. if the ratio is less than one, it indicates that the company is not generarting sufficient revenues to satisfy interest expense.
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