What is the importance of the term 'Interest Coverage Ratio' of a firm in India? 1. It helps in understanding the present risk of a firm that a bank is going to give loan to. 2. It helps in evaluating the emerging risk of a firm that a bank is going to give loan to. 3. The higher a borrowing firm's level of Interest Coverage Ratio, the worse is its ability to service its debt. Select the correct answer using the code given below:
A.1 and 2 only✓ Correct
B.1, 2 and 3
C.1 and 3 only
D.2 only
Explanation
Interest Coverage Ratio helps assess both present and emerging risk for lending. A higher ICR indicates better, not worse, ability to service debt, so statement 3 is incorrect.
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