Question

Target has an EBITDA of -3,048,000,000 and a net interest income/expense of -660,000,000. What is Target's...

Target has an EBITDA of -3,048,000,000 and a net interest income/expense of -660,000,000. What is Target's interest coverage ratio? Please show all work.

Homework Answers

Answer #1

Intrest coverage ratio is used to determine the company's ability pay the debt obligation, it is calculated by the formuae,

Interest Coverage Ratio = EBIT / Interest expense

Where, EBIT is earning before interest and tax

We have givev, EBITDA, so we assumed that depreciation is Zero.

So, Interest Coverage Ratio = 3,048,000,000 / 660,000,000.

Interest coverage ratio = 4.618

The itnerest coverage ratio of more than 2 (In most cases)  is an indication that the company will be bale to meet it's debt obligations.

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