fixed-charge coverage

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)

fixed-charge coverage

The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making payments in the event that business conditions deteriorate and earnings decline. Expenses used in calculating fixed-charge coverage usually include interest, lease payments, preferred dividends, and principal payments on debt. Also called times fixed charges. Compare interest coverage.
References in periodicals archive ?
Fitch's downgrade of the holding company ratings reflects a financial leverage and fixed-charge coverage ratio profile that is no longer consistent with narrow notching.
These positive factors are partially offset by China Minsheng Investment Group Corp., Ltd.'s (CMIG) majority ownership, Sirius Group's more moderate business profile and good fixed-charge coverage.
On the other hand, any events bringing the company's fixed-charge coverage below 2.3x such as deterioration in the operating environment, lower rents, large development projects or debt-financed acquisitions would trigger a downgrade, S&P added.
The outlook change follows narrower covenant headroom under the firm's senior note fixed-charge coverage requirement, S&P said.
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.
Fitch expects VNO's leverage to sustain in the mid to high 6x range - higher than AAT - and a fixed-charge coverage ratio of approximately 2.0x, but VNO is significantly larger than AAT and has a significantly better capital markets access.
For 2011, debt plus preferred-to-capital ratio is expected to remain about 25% and fixed-charge coverage to be about 2.2x.
Enstar's operating earnings-based fixed-charge coverage was favorable, averaging a very strong 12.8x from 2013 to 2017, with 8.2x for 9M18.
"We view the debt associated with this program as operating leverage rather than financial leverage, so AIG's financial leverage and fixed-charge coverage metrics are unaffected, " S&P said in a statement.
- financial leverage ratio below 23% and fixed-charge coverage ratio above 9x on a prolonged basis, while maintaining a strong market franchise and capital position.
The "stable" outlook captures expectations that the company will strengthen its overall cash flow and coverage in the next year or two such that fixed-charge coverage improves to 2.3x and above.
In light of this issuance and the company's expected debt redemption activity, Fitch expects Torchmark to maintain financial leverage below 26% and fixed-charge coverage above 10x through year-end 2018.