n NISM Certifications
XV NISM Series XV
Medium

Which of the following ratios measures a company’s ability to pay interest on its debt?

Practice question from NISM XV Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Current Ratio

  2. B

    Debt-Equity Ratio

  3. Interest Coverage Ratio

    Correct answer

  4. D

    Return on Equity

Why this is the answer

Interest Coverage Ratio = EBIT / Interest Expense. It indicates how easily a company can meet interest obligations from operating profits. Current and Debt-Equity ratios assess liquidity and leverage, while ROE measures profitability.

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