GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Current ratio
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Operating ratio
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Stock turnover ratio
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Interest coverage ratio
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Detailed explanation-1: -Interest coverage ratio is the test of the long-term liquidity of a business. Interest coverage ratio can be defined as the ratio which helps to determine how easily a company can pay the interest on its outstanding debt.
Detailed explanation-2: -Calculating the Interest Coverage Ratio A company’s debt can include lines of credit, loans, and bonds. For example, if a company’s earnings before taxes and interest amount to $50, 000, and its total interest payment requirements equal $25, 000, then the company’s interest coverage ratio is two-$50, 000/$25, 000.
Detailed explanation-3: -The Quick Ratio, also known as the Acid-test or Liquidity ratio, measures the ability of a business to pay its short-term liabilities by having assets that are readily convertible into cash. These assets are, namely, cash, marketable securities, and accounts receivable.