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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
In addition, AM Best expects Hallmark Financial's interest coverage ratio to remain adequate for its ratings.
The interest coverage rate, which measures the ability of a company to meet interest expenses, has been below the benchmark 100 percent line since 2013, according to the Financial Stability Report by the Bank of Korea (BOK).
This reflects Fitch's expectation that following the deconsolidation of Newmark, BGC's leverage, interest coverage and EBTIDA margins will remain relatively consistent with pre-spin metrics.
consumer balance sheet remains relatively healthy, consumer debt service burdens near record lows given low interest rates, Corporate debt ratios near a 20-year high -- however, interest coverage ratios remain within normal range due to continued low rate environment.
The central bank analysis shows that their interest coverage ratio, which compares their operating profit with interest they must pay on loans, falls to 7.9 from 9 if their loan rate rises by 1 percentage point.
Under the amendment, the company will reduce the interest coverage maintenance covenant to 2.0x, provide additional headroom, provide additional flexibility to sell assets, permit the issuance of secured notes with shorter maturities to repay term loans as well as permit the incurrence of other debt to repay term loans.
3) an ambitious growth strategy compared to peers, leading to rising debt levels and diminished, but still adequate interest coverage ratios;
One has to look at indicators such as debt-equity ratio, interest coverage ratio, etc."
The report entitled 'Corporate Financial Health Tracker' said that 36 percent of firms that were examined by the bank had an interest coverage ratio of less than one.
Moody's also said that it expected Hartford's financial leverage to decline as a result of the debt redemptions and the equity buyback thereby improving its interest coverage, an important development as interest coverage has been a deficiency in recent years caused partly by weak consolidated earnings on its variable annuity business.