This ratio expresses the relationship between profits available for payment of interest and the amount of interest payable. This ratio is___

Interest coverage ratio

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Inventory turnover ratio

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Debt equity ratio

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None of these

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Solution

The correct option is A
Interest coverage ratio

Interest coverage ratio xpresses the relationship between profits available for payment of interest and the amount of interest payable.

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Similar questions

From the following information calculate:

(i) Gross Profit Ratio (ii) Inventory Turnover Ratio (iii) Current Ratio (iv) Liquid Ratio (v) Net Profit Ratio (vi) Working capital Ratio:

	Rs
Revenue from Operations	25,20,000
Net Profit	3,60,000
Cast of Revenue from Operations	19,20,000
Long-term Debts	9,00,000
Trade Payables	2,00,000
Average Inventory	8,00,000
Current Assets	7,60,000
Fixed Assets	14,40,000
Current Liabilities	6,00,000
Net Profit before Interest and Tax	8,00,000

A higher value of interest coverage ratio ratio indicates __________ relative to debts.

The following Balance Sheet and other information, calculate following ratios:

(i) Debt Equity Ratio (ii) Working Capital Turnover Ratio (iii) Debtors Turnover Ratio

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