What does the Interest coverage ratio indicate?

The correct answer is option 1- No of times interest on long-term debts is covered by the profits available for interest.

Interest Coverage Ratio is a ratio that deals with the servicing of interest on loan. It is a measure of security of interest payable on long-term debts. It expresses the relationship between profits available for payment of interest and the amount of interest payable. It is calculated as follows:
Interest Coverage Ratio = Net Profit before Interest and Tax/ Interest on long-term debts.

It reveals the number of times interest on long-term debts is covered by the profits available for interest. A higher ratio ensures the safety of interest on debts.