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This is a doubt from Q44 page 38, answer 44 page 171 of the BPP revision kit.
How do you calculate the average Debt/Equity ratio and the Average Interest Coverage Ratio ?
Interest coverage ratio is profit before interest divided by the interest.
Debt/equity is the amount of debt finance divided by the amount of equity finance (the question says to use book (balance sheet) values)
You use the figures from the year-end accounts. You are not asked for an average.
(The averages given are the averages of other companies ratios)Sorry just my carelessness in not reading the content properly . . .
Thank You very much for your time and help.
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