Interest Cover

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jewels.p
jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
in AAT Level 3 (Level 6 in Scotland)
Can anyone explain this in simple terms? Googled it but cant find anything that makes me fully understand it. Thanks

Julie:001_smile:

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  • mikes
    mikes Registered Posts: 254 Dedicated contributor 🦉
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    Hi Julie,

    This shows how how much more profit the company is making than it's interest repayments. It indicates the strength of the company, ie it means that the more it generates, the less likely it will be using its credit from you to pay its cashflow.

    The formula is Operating profit divided by Interest payable.
  • reddwarf
    reddwarf Registered Posts: 528 Epic contributor 🐘
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    http://www.bized.co.uk/learn/business/accounting/busaccounts/notes/ipay-th.htm

    should help too!
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Thanks you two!:thumbup1:
  • mikes
    mikes Registered Posts: 254 Dedicated contributor 🦉
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    That's a handy site, it gives a lot of handy information on other topics as well.

    Thanks.
  • reddwarf
    reddwarf Registered Posts: 528 Epic contributor 🐘
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    far out!

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