UPSC Prelims 2020 · GS Paper 1 · Q72

Economy

Medium · Interest Coverage Ratio, Credit Risk

Consider the following statements regarding the 'Interest Coverage Ratio' of a firm:

1. It helps a lending bank assess the firm's present credit risk.

2. It helps a lending bank assess the firm's emerging or future credit risk.

3. A higher Interest Coverage Ratio indicates a weaker ability of the firm to service its debt.

Which of the statements given above is/are correct?