medium · Debt Capital Markets credit-ratings-risk
What is the primary reason an analyst might compute a 'Capital Expenditures-adjusted' coverage ratio?
- To inflate the company's reported EBITDA for marketing the new issue to prospective bond investors.
- To determine if the company can cover its interest after funding the investments needed to maintain its business.
- Because capital expenditure is directly tax-deductible, subtracting it improves the firm's interest coverage ratio.
- To align the company's financial presentation with asset-light competitors that report no capital expenditure at all.
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