Sage-Tips

Is a high interest cover ratio good?

The lower the interest coverage ratio, the higher the company’s debt burden and the greater the possibility of bankruptcy or default. A higher ratio indicates a better financial health as it means that the company is more capable to meeting its interest obligations from operating earnings.

What is a bad interest coverage ratio?

A bad interest coverage ratio is any number below 1, as this translates to the company’s current earnings being insufficient to service its outstanding debt. A low interest coverage ratio is a definite red flag for investors, as it can be an early warning sign of impending bankruptcy.

Is a higher or lower interest coverage ratio better?

The interest coverage ratio is used to measure how well a firm can pay the interest due on outstanding debt. Generally, a higher coverage ratio is better, although the ideal ratio may vary by industry.

Is a negative interest coverage good?

Although it may be possible for companies that have difficulties servicing their debt to stay in business, a low or negative interest coverage ratio is usually a major red flag for investors. In many cases, it indicates that the firm is at risk of bankruptcy in the future.

What is good debt-to-equity ratio?

Generally, a good debt-to-equity ratio is anything lower than 1.0. A ratio of 2.0 or higher is usually considered risky. If a debt-to-equity ratio is negative, it means that the company has more liabilities than assets—this company would be considered extremely risky.

What is a good dividend cover ratio?

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In summary, the key points to know about the DCR are: The dividend coverage ratio measures the number of times a company can pay its current level of dividends to shareholders. A DCR above 2 is considered a healthy ratio. A DCR below 1.5 may be a cause for concern.

What is good debt to equity ratio?

Is a higher current ratio better?

The higher the ratio, the more liquid the company is. All other things being equal, creditors consider a high current ratio to be better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which are due over the next 12 months.

What is a good default risk ratio?

Companies with a default risk ratio between 1.0 and 3.0 are designated as “medium risk”, and companies with a default ratio of 3.0 and higher are classified as “low risk” because their free cash flows are 3 or more times the size of their annual principal payments).

What is Apple’s interest coverage ratio?

Apple’s latest twelve months interest coverage ratio is 41.2x. Apple’s interest coverage ratio for fiscal years ending September 2017 to 2021 averaged 26.1x. Apple’s operated at median interest coverage ratio of 23.1x from fiscal years ending September 2017 to 2021.

What’s a bad debt-to-equity ratio?

How do you calculate interest coverage ratio?

To calculate the interest coverage ratio using the figures found on the income statement, divide EBIT (earnings before interest and taxes) by the total interest expense.

How to calculate interest coverage ratio?

A company’s interest coverage ratio determines whether it can pay off its debts.

The ratio is calculated by dividing EBIT by the company’s interest expense—the higher the ratio,the more poised it is to pay its debts.

Creditors can use the ratio to decide whether they will lend to the company.

A lower ratio may be unattractive to investors because it may mean the company is not poised for growth.

What does a low interest coverage ratio mean?

If interest coverage ratio is high, it means that company has enough funds to service the debts and if it is low then it can become a problem for a company in the near future because if it is low, then the company is not able to service the debts so the lenders or debenture holders might sue the company for damages.

What percentage of debt to income ratio is good?

A good debt-to-income ratio is typically below 36 percent. In most cases, having a debt-to-income ratio of 43 percent is the highest ratio you can have to be qualified for a mortgage. This is important to know if you are planning to purchase a house soon and are saving for a down payment.