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Exam ICWIM Topic 1 Question 103 Discussion

Actual exam question for CISI's ICWIM exam
Question #: 103
Topic #: 1
An investor would regard a company's Interest Cover ratio as significant because it provides:

Suggested Answer: A Vote an answer

Interest Cover Ratio measures how easily a company can meet interest payments on its debt.
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* Why is Option A Correct?
* A higher ratio means a company comfortably covers interest costs.
* A low ratio signals higher financial risk and potential default risk.
* Why Not Other Options?
* B (Interest rate paid) # The ratio assesses coverage, not cost of debt.
* C (Debt vs equity breakdown) # This is measured by the debt-to-equity ratio.
* D (Cash for dividends) # Interest cover assesses debt serviceability, not dividend affordability
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# Reference: CFA Institute (Financial Ratios), CISI Wealth & Investment Management.

by Joseph at Aug 13, 2025, 01:25 PM

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