UPSC PRELIMS · ECONOMICS · BANKING — INTEREST COVERAGE RATIO
What is the importance of the term “Interest Coverage Ratio” of a firm in India? 1. It helps in understanding the present risk of a firm that a bank is going to give loan to. 2. It helps in evaluating the emerging risk of a firm that a bank is going to give loan to. 3. The higher a borrowing firm’s level of Interest Coverage Ratio, the worse is its ability to service its debt. Select the correct answer using the code given below:
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EXPLANATION
Interest Coverage Ratio measures a firm's ability to meet interest obligations; higher coverage generally indicates better, not worse, debt-servicing capacity.
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