Fixed-charge coverage ratio

Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (Earnings before interest, depreciation and amortization minus unfunded capital expenditures and distributions) divided by total debt service (annual principal and interest payments). Notice that lease payments are sometimes included in the calculations.

Fixed-Charge Coverage Ratio

A measure of a company's ability to pay its fixed expenses, such as rent and interest, on debt without resorting to more debt. A ratio over 1 indicates that the company is able to pay its fixed charges, while a ratio below one indicates the opposite. The fixed charge coverage ratio is calculated thus:

Fixed-charge coverage ratio = (EBIT + fixed charges before tax) / (fixed charged before tax + interest)
References in periodicals archive ?
GAAP fixed-charge coverage ratio in the 12x to 14x range;
The proposed issue will not affect the company's debt leverage and would modestly improve fixed-charge coverage ratio.
In most cases the fixed-charge coverage ratio is seen as an extension of the more standard interest coverage ratio (often referred to as times interest earned), a ratio itself defined along the lines of a comparison of a company's operating earnings to its interest expenses.