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Interest Coverage Ratio

   Also found in: Acronyms, Wikipedia 0.04 sec.
Interest Coverage Ratio
A ratio used to determine how easily a company can pay interest on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period:



Notes:
The lower the ratio the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.

Interest coverage ratio
The ratio of earnings before interest and taxes to annual interest expense. This ratio measures a firm's ability to pay interest.


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? Mentioned in ? References in periodicals archive
 
The cash interest coverage ratio is analogous to the old-fashioned coverage ratio (also known as the interest coverage ratio).
The power of cash flow ratios by Yamamura, Jeanne H. / Journal of Accountancy
Additionally, Alfa Corp continues to demonstrate strong interest coverage capacity with an earnings based interest coverage ratio of 17.
Fitch Affirms Alfa's Ratings by Business Wire
The cash interest coverage ratio should complement the traditional interest coverage ratio.
Developing ratios for effective cash flow statement analysis by Mills, John R. / Journal of Accountancy
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