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What is the formula for Time interest earned ( interest cover)?

Accounting Auditing Financial Reporting
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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/03/21
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Muhammad Ramzan Tufail ACCA
by Muhammad Ramzan Tufail ACCA , Assistant Finance Manager , Eltizam Asset Management Group

Thanks for having this kind of questions.

 

Interest Cover: *EBIT/Interest Expense

 

*Earning Before Interest & Tax

 

This above ratio is considered as a Company's Solvency ratio as it measures the company's abilities to make the interest and debt expense.

Dasarathi Rath
by Dasarathi Rath , Sr. Accountant , Al Luban Special Investment LLC

Time interest earned on interest covered :- FV= P+ SI =P + P (I) (N), FV= Future value SI = simple interest P= Principal amount I = Interest rate per time period N= Number of time periods,

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