Which of the Following Statements About the Interest Coverage Ratio

Multiple Choice

Which of the following statements about the interest coverage ratio is NOT true?

A) The interest coverage ratio is calculated as (earnings before interest and tax) / (interest expense) .
B) The interest coverage ratio indicates the degree to which commitment to pay interest on debts is covered by the company's ability to generate profit.
C) A low coverage ratio may be a warning of solvency problems.
D) A high interest coverage ratio indicates the company is not operating at sufficient profitability levels.