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3#
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发表于 2011-7-11 17:39
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In page 425 of the Vol 3 curriculum, there is an example of capitalizing interest (of $1,301) and calculating interest coverage ratio.
If the interest is capitalized then interest coverage ratio = EBIT / Interest Expense = 25,736/12,179 = 2.11
If the interest interest in not capitalized then it is added to Interest Expense and the interest coverage ratio = EBIT / (Interest Expense + Capitalized Interest) = 25,736/(12,179 + 1,301) = 1.91
The above is what the curriculum says.
However, I would think that if the interest was not capitalized and instead expensed, then EBIT should also decrease. The capitalized interest is not an expense and hence is not subtracted in calculating EBIT. If it is not capitalized then it should be subtracted to calculate EBIT.
Any thoughts?
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