interest coverage

Interest Coverage Ratio

A ratio of a company's EBIT to its total expenses from interest payments. The interest coverage ratio measures the company's ability to make interest payments, such as in its debt service. A ratio above one indicates that the company is able to pay its interest, while a ratio below one means that its interest payments exceed its earnings.

Times Interest Earned

A measure of a company's ability to service its debts. It is calculated by dividing the company's earnings before interest and taxes by the total interest payable on its debts, expressed as a ratio. Investors prefer publicly-traded companies to have a middling times-interest-earned ratio. A low ratio indicates an inability to service debts, while too high a ratio indicates a lack of debt that investors may find undesirable.

interest coverage

A measure of a firm's ability to meet required interest obligations. A high coverage ratio indicates enhanced ability to make timely interest payments. Interest coverage is calculated by dividing the firm's operating income by its required interest payments. Also called times interest earned. Compare fixed-charge coverage. See also debt management ratio.
References in periodicals archive ?
NEW YORK, July 26 /PRNewswire/ -- Top department stores are essentially debt-free and protect bondholders with higher interest coverage than their discount and specialty store competitors, a new Fitch study shows.
Recommended cash flow ratios that analyze a company's ability to meet these obligations include cash interest coverage, cash debt coverage and cash dividend coverage.
Additionally, Alfa Corp continues to demonstrate strong interest coverage capacity with an earnings based interest coverage ratio of 17.
s ('BBB' senior debt) interest coverage would decrease to 1.
27, 2006 payment date, failing senior interest coverage tests have diverted principal proceeds to pay the senior secured note principal, but once these tests were cured, principal cashflows have been used to pay interest on the second priority senior notes.
Financial covenants in the $1 billion bank facility include a maximum leverage ratio of 3 times (x) and minimum interest coverage ratio of 3x.
Lack of external financing stress and low acid rain exposure are expected to permit interest coverage and capital ratios to remain relatively strong.
For 2007, Fitch projects that ETR's FFO interest coverage will be in the range of 4.
Offsetting factors include decline in market position and lowered interest coverage ratio due to the declined earnings.
Earning-based interest coverage through the first six months of 2006 was very good at 7.
EBITDA to interest coverage for the LTM from March 31, 2006 was 11.
Financial leverage at LFG associated with the acquisition of CTGI is expected to increase to approximately 33%, from 27% at June 30, 2006, while interest coverage is expected to trend closer to 5 times (x) compared to 7x coverage currently.