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Series : Ratio Analysis (14 th Post)
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Series : Ratio Analysis (14 th Post)
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This Ratio helps us to understand the how easily a company can pay its interest on the Outstanding Debt .
The Lower the Ratio,The higher the company’s debt burden. , A low Interest coverage ratio means less interest are available to meet its interest payments. When a company’s ratio is less then 1.5 the company is questionable for its ability to pay the interest.
A ratio greater then 1.5 indicates company is in better health and more likey to meet its financial obligations.
Formula: Interest Coverage Ratio % = Earnings before interest & Expenses (EBIT) / Interest Expense
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The Lower the Ratio,The higher the company’s debt burden. , A low Interest coverage ratio means less interest are available to meet its interest payments. When a company’s ratio is less then 1.5 the company is questionable for its ability to pay the interest.
A ratio greater then 1.5 indicates company is in better health and more likey to meet its financial obligations.
Formula: Interest Coverage Ratio % = Earnings before interest & Expenses (EBIT) / Interest Expense
Next Post on Ratio Analysis: Debt Ratios : Cash Flow To Debt Ratio
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In my quest for learning value investing I came acrros this interesting article and thought would like to share this with the community
Comments / Improvements and points worth considering are welcome
Google Feedburner is free & allows to directly deliver any new post on this blog to your email .If you are interested kindly enter your Email in the “Subscribe Via Email” on the top left hand side of the navigation menu’s.
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It is a very important point which must be analyze to conclude how a company is likely to perform. Further experts can help with good recommendations on stock tips to improve your market returns.
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