What financial metric is used to evaluate a company's ability to cover its fixed expenses?
Understand the Problem
The question is asking for a financial metric that helps in assessing how well a company can meet its fixed costs, such as interest expenses. The focus is on determining which of the given options best fits this criterion.
Answer
Fixed-charge coverage ratio (FCCR).
The fixed-charge coverage ratio (FCCR) measures a company's ability to cover its fixed expenses.
Answer for screen readers
The fixed-charge coverage ratio (FCCR) measures a company's ability to cover its fixed expenses.
More Information
The fixed-charge coverage ratio gives insights into whether a company's earnings are adequate to meet its fixed financial obligations, such as debts and lease payments. A higher ratio indicates a stronger ability to cover these expenses.
Sources
- Fixed Charge Coverage Ratio Explanation - Investopedia - investopedia.com
- Fixed Charge Coverage Ratio: Definition & Formula - LendingTree - lendingtree.com
- Decoding Financial Metrics: DSCR vs. Other Key Indicators - Sprint Funding - sprintfunding.com
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