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 3 only
B.1, 2 and 3
C.1 and 2 only✓ Correct
D.2 only
Explanation
ICR measures a firm's ability to service its interest obligations—useful for assessing both present and emerging risks. A higher ICR means better (not worse) debt-servicing ability.
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