Interest coverage ratio


Also found in: Acronyms.

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.

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.
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To estimate EBIT and compute the interest coverage ratio, the CFO analyzes the company's cost structure.
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14, while our actual interest coverage ratio was 3.
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The traditional accrual-based interest coverage ratio uses income before interest and taxes divided by interest expense.
Developing ratios for effective cash flow statement analysis

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