Interest Coverage Ratio Calculator

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EBIT is the standard; EBITDA adds back non-cash charges for a higher, less conservative ratio; EBITDA minus CapEx is the most conservative cash-based view.
Earnings before interest and taxes, also called operating income. Use the annual figure from the income statement.
USD
Total interest payments on all debt for the period, found on the income statement. Use net interest (expense minus income) if the company earns significant interest.
USD
Interest Coverage RatioExcellent
5x

Times the company's earnings cover its interest payments

Earnings numerator5,000,000USD
Earnings cushion above interest4,000,000USD
Financial healthExcellent - very strong coverage
5 x
Critical<1Weak1-1.5Moderate1.5-2.5Healthy2.5-5Excellent5+

Interest coverage is 5.00x - excellent financial flexibility.

  • Very strong coverage. The company generates earnings many times larger than its interest obligations, indicating low financial leverage risk.
  • After covering interest, 400% of the interest amount remains as earnings cushion (4,000,000 USD).
  • This ratio uses EBIT as the numerator. Switching to a more conservative method (e.g. EBITDA minus CapEx) will typically yield a lower, more cautious result.

Next stepLook at the trend over 3-5 years and compare against industry peers. A single period's ratio can be distorted by one-off gains or charges.

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