Exercise 5

A companys income statement until the Interest income (expense) line for the year 2020 is the following in :

Q18. What is the EBIT of this company? Detail your calculation.

Q19. What is the Interest coverage ratio using the EBIT of this company? Detail your calculation.

Q20. What is better for a company?

Write here below an X in front of the correct answer:

To have a higher Interest coverage ratio

To have a lower Interest coverage ratio

Justify your answer:

Revenue 28 880 Cost of sales - 17 000 Gross Profit 11 880 Selling, distribution and administrative expenses - 7 000 Impairment losses/Depreciation 2 000 Share of results in associated companies 4 000 Other income 1 500 Operating income 8 380 Other income 1 200 EBIT Interest income (expense) 1 900