Both companies turned a profit.
One is a bad quarter from missing a loan payment.
1.5
Times the stretched company earns its own interest bill. Looks fine this year. One ordinary dip from not covering it at all.
Friend was telling me a company he owns is perfectly safe on its debt. It made a profit last year, he said, so it can clearly pay its loans. I hear that one a lot. Profit and the ability to actually pay your lender are two different questions. One number settles it, and it is never on the front page of a results release. Operating profit divided by the interest bill. How many times over the business earns what it owes the bank.