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Business Data Management · Quiz 2 · 16 Aug 2026 · May 2026 term

Question 12: Why might a lender prefer to look at the Interest Covera…

Question 12

+2 marksOne correct option

Why might a lender prefer to look at the Interest Coverage Ratio (ICR) instead of just the total Net Profit?

  1. A

    Because Net Profit includes non-operating income that cannot be used for interest.

  2. B

    Because ICR specifically measures the ability to service debt from operating liquidity.

  3. C

    Because Net Profit is always higher than ICR.

  4. D

    Because ICR excludes depreciation, making it a more conservative measure of profit.

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Correct answer

  • B

    Because ICR specifically measures the ability to service debt from operating liquidity.

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Question 12 of 24 in the IIT Madras BS Business Data Management (BDM) Quiz 2 paper sat on 16 Aug 2026, in the May 2026 term (Business Data Management 14 Aug 26). It carries 2 marks.

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