The interest coverage ratio, calculated by dividing earnings before interest and taxes (EBIT) by interest...
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The interest coverage ratio, calculated by dividing earnings before interest and taxes EBIT by interest expenses, measures a company's ability to cover its interest obligations with its earnings. A higher ratio indicates a stronger capacity to meet interest payments, reducing the risk of default. This ratio is critical for creditors and investors to evaluate the companys financial health and risk profile. It provides insights into the companys ability to sustain debt levels and manage financial stability, ensuring that it can meet its longterm obligations.
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