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A bond holder would be most concerned?

A bond holder would be most concerned with which one of the following? a. Inventory turnover b. Times interest earned c. Quick ratio d. Earning per share

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Question added by Anayatullah Tahir , Finance Manager , Etqan Projects
Date Posted: 2014/04/16
Deleted user
by Deleted user

Times interest earned

The bond holder is more concered about his interest and whether it is covered by EBIT or not so it is the most important ratio to him.

Times interest earned = EBIT / Interest expense

Ashish kumar
by Ashish kumar , Trade Document Checker , The Royal Bank Of Scotland,

A bond holder would be most concerned with the time interest he can earn as he has nothing to do with EPS

Muhammad mohsin saleem
by Muhammad mohsin saleem , General Accountant , Al Ghadeer Modern Trade Enterprises

b

Fuzail Zubaid Ahmad MBA CPA CMA
by Fuzail Zubaid Ahmad MBA CPA CMA , Vice President Finance , Nesaj Real Estate Development Company

The answer is "b" Times Interest Earned (TIE) by the company (EBIT / Interest expense).  The higher the ratio value, better is the financial health of the company.  This ratio is also one of the key ratios used by credit rating agencies for assigning bond ratings.  If the TIE ratio deteriorates and the rating agency is yet to lower the bond rating, bond holder can avoid booking capital loss by selling the bond ahead of most others in the market, but if bond prices decline fast, which usuaully happens then the bond holder has incurred capital loss already.  The real thing to do is to "predict" worsening of TIE ratio and then selling before the actual price decline occurs.  

Muhammad Zubair
by Muhammad Zubair , CFO / Chief Accountant , RH Group

Correct answer is b

Abba Adji Tahir
by Abba Adji Tahir , Human Resources Manager , American University of Ras Al Khaimah

B - Times Interest Earned

SRINIVAS RAO KANAMARLAPUDI
by SRINIVAS RAO KANAMARLAPUDI , Senior AGM , SEAWAYS SHIPPING AND LOGISTICS LIMITED

I am of the opinion of 'C' Quick Ratio, Bond holder concerns about security and regular & timely payment of Interest. Quick ratio indicates Liquidity position of the organisation. 

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