DEBT CONVENANT COMPLIANCE

Question 1

Calc, the interest coverage ratio?

Answer 1

To calc the interest coverage ratio

Operating income / interest expense

150,000 / 40,000 = 3.75 is greater than 3

Question 2

Calc, the current ratio?

Answer 2

current ratio is helpful in measuring short term liabillities and short term assets

To calc the current ratio first we need to

Current Assets / Current liabilitlies

200,000 / 100,000 = 2