EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy
The interest coverage ratios (ICRs) are used to quantify the ability of firms to pay financial debts; ICRs are then considered by banks such as covenants in the financing term sheet, and are used by researchers and the rating agencies to estimate the probability of default of firms. Typically, ICRs...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Masaryk University
2012-05-01
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| Series: | Financial Assets and Investing |
| Subjects: | |
| Online Access: | http://is.muni.cz/do/econ/soubory/aktivity/fai/33967799/FAI_issue2012_02_Iotti_Bonazzi.pdf |
| _version_ | 1818057136605757440 |
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| author | Mattia Iotti Giuseppe Bonazzi |
| author_facet | Mattia Iotti Giuseppe Bonazzi |
| author_sort | Mattia Iotti |
| collection | DOAJ |
| description | The interest coverage ratios (ICRs) are used to quantify the ability of firms to pay financial debts; ICRs are then considered by banks such as covenants in the financing term sheet, and are used by researchers and the rating agencies to estimate the probability of default of firms. Typically, ICRs calculation is based on profit margins, such as EBITDA and EBIT; EBITDA and EBIT approximate, but do not directly express, cash flows available to pay financial debts. The article aims to evaluate whether there are significant differences in results using ICRs based on EBITDA or EBIT and ICRs based on different definitions of cash flow (CF). The application is made to a sample of firms characterized by high absorption of capital operating in the Italian agro-food sector. The article highlights that there are statistically significant differences using ICRs EBITDA and EBIT based and ICRs based on different CF definitions. |
| first_indexed | 2024-12-10T12:39:56Z |
| format | Article |
| id | doaj.art-2de48ae720134b1b906513d4a5040b14 |
| institution | Directory Open Access Journal |
| issn | 1804-5081 1804-509X |
| language | English |
| last_indexed | 2024-12-10T12:39:56Z |
| publishDate | 2012-05-01 |
| publisher | Masaryk University |
| record_format | Article |
| series | Financial Assets and Investing |
| spelling | doaj.art-2de48ae720134b1b906513d4a5040b142022-12-22T01:48:33ZengMasaryk UniversityFinancial Assets and Investing1804-50811804-509X2012-05-01321931EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in ItalyMattia IottiGiuseppe BonazziThe interest coverage ratios (ICRs) are used to quantify the ability of firms to pay financial debts; ICRs are then considered by banks such as covenants in the financing term sheet, and are used by researchers and the rating agencies to estimate the probability of default of firms. Typically, ICRs calculation is based on profit margins, such as EBITDA and EBIT; EBITDA and EBIT approximate, but do not directly express, cash flows available to pay financial debts. The article aims to evaluate whether there are significant differences in results using ICRs based on EBITDA or EBIT and ICRs based on different definitions of cash flow (CF). The application is made to a sample of firms characterized by high absorption of capital operating in the Italian agro-food sector. The article highlights that there are statistically significant differences using ICRs EBITDA and EBIT based and ICRs based on different CF definitions.http://is.muni.cz/do/econ/soubory/aktivity/fai/33967799/FAI_issue2012_02_Iotti_Bonazzi.pdfEBITDA / EBIT based interest coverage ratiosItalian agro-food firmsdebt repaymentoperating cash flow |
| spellingShingle | Mattia Iotti Giuseppe Bonazzi EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy Financial Assets and Investing EBITDA / EBIT based interest coverage ratios Italian agro-food firms debt repayment operating cash flow |
| title | EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy |
| title_full | EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy |
| title_fullStr | EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy |
| title_full_unstemmed | EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy |
| title_short | EBITDA/EBIT and cash flow based ICRs: A comparative approach in the agro-food system in Italy |
| title_sort | ebitda ebit and cash flow based icrs a comparative approach in the agro food system in italy |
| topic | EBITDA / EBIT based interest coverage ratios Italian agro-food firms debt repayment operating cash flow |
| url | http://is.muni.cz/do/econ/soubory/aktivity/fai/33967799/FAI_issue2012_02_Iotti_Bonazzi.pdf |
| work_keys_str_mv | AT mattiaiotti ebitdaebitandcashflowbasedicrsacomparativeapproachintheagrofoodsysteminitaly AT giuseppebonazzi ebitdaebitandcashflowbasedicrsacomparativeapproachintheagrofoodsysteminitaly |