Coverage ratios of a company in simultaneous years (say 2010 and 2011) are as follows, explain on what the reason for the increase/decrease in value and financial health (either profit/loss if continued) of the company might be according to each ratio.Debt coverage decreased from 1.1 to 1.Interest coverage decreased from 25 to 17Reinvestment ratio decreased from 0.5 to 0.35Debt payment decreased from 0.7 to 0.5Investing & Financing ratio decreased from 1 to -0.5.

A coverage ratio of a company tells us about a company's ability to pay off its liabilities over a…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Coverage ratios of a company in simultaneous years (say 2010 and 2011) are as follows, explain on what the reason for the increase/decrease in value and financial health (either profit/loss if continued) of the company might be according to each ratio.

Debt coverage decreased from 1.1 to 1.
Interest coverage decreased from 25 to 17
Reinvestment ratio decreased from 0.5 to 0.35
Debt payment decreased from 0.7 to 0.5
Investing & Financing ratio decreased from 1 to -0.5.

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