Page 392 - F2 Integrated Workbook STUDENT 2019

Chapter 18

Interest cover

Operating profit

–––––––––––––––––––––– = n times

Finance cost

TUTOR GUIDANCE

 Interest cover outline how many times an entity can pay interest out of its
profit.

 The higher the better.

 If low, indicates high risk of failing to service the finance, and potential going
concern issues.

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