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Foundations Of Financial Management
Found in: Page 524
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

Corporate debt has been expanding very dramatically in the last three decades. What has been the impact on interest coverage, particularly since 1977? (LO16-1)

In 1977, the U.S. corporations had interest coverage eight times, decreasing when the financial crisis ended.

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Step by Step Solution

Corporate debt

Corporate debt is one of the financial instruments issued by a corporation to raise capital. A person investing in corporate debts is entitled to receive fixed interest payments.

Impact of corporate bond on interest coverage

The U.S. manufacturing corporations covered its interest payments at a rate of eight times by operating earnings in 1977.

At the end of the financial crisis in 2007-08, the times' interest earned graph moved down to 2.4 times.

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