If a hospital has EBIT of 2.4 million and interest expense of 0.8 million, what is the interest coverage ratio?

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Multiple Choice

If a hospital has EBIT of 2.4 million and interest expense of 0.8 million, what is the interest coverage ratio?

Explanation:
Interest coverage ratio shows how many times a company’s earnings before interest and taxes can cover its interest payments. It’s calculated by dividing EBIT by the interest expense. Here, EBIT is 2.4 million and the interest expense is 0.8 million, so 2.4 divided by 0.8 equals 3.0. This means operating earnings can cover interest three times, indicating a comfortable ability to meet interest obligations. The other numbers would require different interest amounts to reach those multiples, which don’t match the given figures.

Interest coverage ratio shows how many times a company’s earnings before interest and taxes can cover its interest payments. It’s calculated by dividing EBIT by the interest expense. Here, EBIT is 2.4 million and the interest expense is 0.8 million, so 2.4 divided by 0.8 equals 3.0. This means operating earnings can cover interest three times, indicating a comfortable ability to meet interest obligations. The other numbers would require different interest amounts to reach those multiples, which don’t match the given figures.

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