What is a bad interest coverage ratio?

  1. A “bad” interest coverage ratio is any number less than one.
  2. It means that the business’s earnings are not sufficiently high enough to serve their outstanding debts. 
  3. Although it may be possible for companies that have difficulties servicing their debt to stay in business.
  4. A low or negative interest coverage ratio is usually a major red flag for investors. 
  5. In many cases, it indicates that the firm is at risk of bankruptcy in the future.

Further Readings – 

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

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