[Verse 1]
When companies need cash to grow and thrive
They turn to lenders to keep dreams alive
But borrowing money comes with a price
Interest payments that cut like ice
The cost of debt is what we must measure
To find the true expense of borrowed treasure
[Chorus]
Cost of debt, don't forget the tax shield
Interest deductible makes the real cost yield
After-tax rate is what matters most
Multiply by one minus tax to boast
Coverage ratio tells the tale
Can you pay or will you fail
[Verse 2]
Take the interest rate upon your loan
But tax deductions help you hold your own
If interest is twenty percent you pay
And tax rate's thirty, here's the way
Twenty times seventy percent remains
Fourteen percent is your true debt gains
[Chorus]
Cost of debt, don't forget the tax shield
Interest deductible makes the real cost yield
After-tax rate is what matters most
Multiply by one minus tax to boast
Coverage ratio tells the tale
Can you pay or will you fail
[Verse 3]
Interest coverage shows your payment power
EBIT divided by interest each hour
Times interest earned must stay above
Two point five to show financial love
Credit rating agencies watch this metric
Higher ratios keep your rating symmetric
[Bridge]
Debt capacity analysis reveals
How much borrowing your balance sheet can deal
Credit risk assessment weighs the cost
Higher risk means higher rates are crossed
Financial leverage cuts both ways
Lower cost but riskier days
[Chorus]
Cost of debt, don't forget the tax shield
Interest deductible makes the real cost yield
After-tax rate is what matters most
Multiply by one minus tax to boast
Coverage ratio tells the tale
Can you pay or will you fail
[Outro]
Before you borrow, calculate with care
The true cost of debt that you will bear
Tax benefits reduce the sting
But coverage ratios are the key thing
Debt or equity, make your choice
Let the numbers be your guiding voice