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Calculate the interest coverage ratio for Company YZ, given its earnings before interest and taxes (EBIT) of $2 million and interest expense of $200,000. Describe
Calculate the interest coverage ratio for Company YZ, given its earnings before interest and taxes (EBIT) of $2 million and interest expense of $200,000. Describe the interest coverage ratio as a solvency ratio used to measure a company's ability to meet interest obligations with its operating income. Discuss the significance of a high or low interest coverage ratio in assessing financial solvency, debt repayment capacity, and its implications for credit risk analysis and investor confidence.
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