Fixed-Charge Coverage Ratio

Fixed-Charge Coverage Ratio

A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following:

Notes:

For example, since leases are a fixed charge, the calculation determining a company's ability leases would be (EBIT + Lease Expenses) / (Lease Expenses + Interest).

See also: Debt Financing, EBIT, Lease, Variable Annuity

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Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of ( net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments).