FRA

CFA Level I FRA
#1

Is there any thumb rule to differentiate whether the given ratio is performance or coverage?

thanks

#2

Coverage generally has to deal with debt servicing - things such as interest coverage ratios (EBIT/Interest) or fixed charge coverage ratios (EBIT or EBITDA/Interest and Lease payments).

Performance ratios are generally turnover or asset utilization ratios. Things that give insight as to how the firm is operating or how efficiently the firm is operating - things such as ROA, Asset Turnover, ROE, Invetory turnover, etc.

#3

Thanks…