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A debt limitation covenant prohibits a borrower from issuing additional longterm debt if it would cause the issuer's interest coverage ratio (EBIT to total interest)
A debt limitation covenant prohibits a borrower from issuing additional long‑term debt if it would cause the issuer's interest coverage ratio (EBIT to total interest) to fall below 3.00 times. Suppose the firm's earnings before interest and taxes (EBIT) are $78M (M = million), and interest is $20M. Everything else equal.
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Answer i EBIT 78 million ii If interest coverage ratio is 3 then amount of i...
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
