Walking on thin ice
Wealth Insight|August 2022
As interest rates rise, companies with a low interest-coverage ratio are likely to be in a difficult situation
Karthik Anand Vijay
Walking on thin ice

Over the past few months, central banks have increased interest rates to rein in inflation. And by the looks of it, they are going to continue doing so. This will lead to a rise in interest expense for borrowers. Consequently, companies with a low-interest coverage ratio will be in a spot.

The interest-coverage ratio is used to evaluate a company's interest-paying ability. It is an important metric and especially so in a rising-interest-rate environment. It is calculated as follows:

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Denne historien er fra August 2022-utgaven av Wealth Insight.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.