Interest Coverage Ratio Calculator
This calculator helps you evaluate a company's ability to meet its interest obligations using the interest coverage ratio. It compares earnings before interest and taxes (EBIT) to interest expenses, giving you a clear picture of financial stability and debt service capacity.
Calculate Interest Coverage from EBIT and Interest Expense
Interest Coverage Ratio Formula
Where:
- EBIT – Earnings Before Interest and Taxes
- Interest Expense – total interest payments due on debt
This formula determines how many times a company can pay its interest from its operating income.
The coverage ratio is a key indicator of a company’s financial health and ability to meet debt obligations. A higher ratio suggests stronger financial footing and lower risk for lenders. This calculator is useful for investors, analysts, and business owners assessing creditworthiness or financial performance. Generally, a ratio above 1.5 is considered acceptable, but this varies by industry.