Collingwood Corp. has a revolving line of credit on which it owes $50 million. One of the

Question:

Collingwood Corp. has a revolving on which it owes $50 million. One of the restrictions imposed with this financing arrangement is that the company must maintain a minimum interest coverage ratio of 2. If this is the only borrowing, and the annual interest rate is 9.75 percent, how much does the company have to earn to live up to the covenant?

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...