Hi,
I have a question on question on Practice Program No. 8 of Reading 19. Question asks the impact on interest coverage ratio if investment in associate is excluded. The answer says there is no impact, quoting “The calculation for interest coverage is EBIT/interest expense, neither of which is affected by the investment in associates.”
My questions is that the investment return from associate is included in EBIT, how come excluding investment in associate wouldn’t affect EBIT?
Thanks!