Interest Coverage Ratio
The Interest Coverage Ratio (ICR) measures a company's ability to pay interest on its outstanding debt using its earnings before interest and taxes (EBIT). A low ICR indicates that the company may struggle to meet its interest obligations, potentially signaling financial distress or an increased risk of bankruptcy. On the other hand, a higher ICR suggests strong financial health, implying that the company is more capable of paying interest on its debt. Generally, a higher ICR is considered a sign of stability and financial strength, ensuring that the company can meet its debt obligations comfortably.
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