Understanding Coverage Ratios in Accountancy

The video tutorial introduces coverage ratios, focusing on debt service coverage ratio (DSCR) and interest coverage ratio. It explains how these ratios assess a company's ability to meet debt obligations, providing formulas and examples. The DSCR is calculated using net operating income and debt payments, while the interest coverage ratio uses EBIT and interest expenses. The video emphasizes the importance of these ratios for lenders and investors, and previews upcoming topics on preference dividend and fixed charge coverage ratios.

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