ocr: Interest Cover This ratio measures the ability of the business to meet its loan capital servicing commitments. The principal danger of high gearing is the possibility that as a consequence of taking out too much fixed-interest borrowing the business will not generate sutticient protit to cover these payments. This tinal ratio looks directly at the ability of the business to meet these payments from its trading profits. Interest Cover = Profit Before Interest and Tax Interest Payments Both these figures have been computed elsewhere amongst the previous ratios. Thus, Interest Cover l E378 3.38 t ...
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