ACCA FA · Chapter 14 · Question 6 of 10
A company has profit before interest and tax of $90,000 and finance costs of $18,000. What is its interest cover?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 5 times
Explanation
Interest cover = profit before interest and tax / finance costs = $90,000 / $18,000 = 5 times. Using profit after interest ($72,000 / $18,000) gives 4 times, which understates the cover.
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