Exam ICWIM Topic 1 Question 55 Discussion
Actual exam question for CISI's ICWIM exam
Question #: 55
Topic #: 1
Question #: 55
Topic #: 1
An investor would regard a company's Interest Cover ratio as significant because it provides:
Suggested Answer: A Vote an answer
Interest Cover Ratio measures how easily a company can meet interest payments on its debt.
A black text with black letters AI-generated content may be incorrect.
* Why is Option A Correct?
* A higher ratio means a company comfortably covers interest costs.
* A low ratio signals higher financial risk and potential default risk.
* Why Not Other Options?
* B (Interest rate paid) # The ratio assesses coverage, not cost of debt.
* C (Debt vs equity breakdown) # This is measured by the debt-to-equity ratio.
* D (Cash for dividends) # Interest cover assesses debt serviceability, not dividend affordability
.
# Reference: CFA Institute (Financial Ratios), CISI Wealth & Investment Management.
A black text with black letters AI-generated content may be incorrect.
* Why is Option A Correct?
* A higher ratio means a company comfortably covers interest costs.
* A low ratio signals higher financial risk and potential default risk.
* Why Not Other Options?
* B (Interest rate paid) # The ratio assesses coverage, not cost of debt.
* C (Debt vs equity breakdown) # This is measured by the debt-to-equity ratio.
* D (Cash for dividends) # Interest cover assesses debt serviceability, not dividend affordability
.
# Reference: CFA Institute (Financial Ratios), CISI Wealth & Investment Management.
by Stanley at Sep 12, 2025, 04:50 AM
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