What does high interest coverage ratio mean?

  1. Higher Ratio means solvent – The higher the interest coverage ratio of any firm, the more solvent it is. 
  2. If an organization, under normal circumstances, earns way more than what its interest costs are, then it is financially secure. 
  3. Interest coverage ratio is of prime importance to lenders like banks and bond traders. Credit rating agencies also pay close attention to this number before they rate the company.

Further Readings – 

  1. What Do You Mean By Line of Credit?
  2. Non Performing Assets (NPA)
  3. Types of Bonds

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