Interest Coverage Ratio Calculator helps calculating the Interest Coverage ratio.
The interest coverage ratio, also known as “times interest earned”, is a debt ratio and profitability ratio used to determine how easily a company can pay interest on its outstanding debt.
The interest coverage ratio equals to the ratio between EBIT and interest.
The EBIT is a company's earnings before interest and taxes during a given period
The interest equals to the company's interest payments due within the same period.
For example, If The EBIT equals to 100,000 dollars and the Interest equlas 20,000 dollars, the Interest Coverage Ratio equals to 5, which means that the firm can pay the interest 5 times, out of the EBIT
Lenders, investors, and creditors often use this formula to determine a company's riskiness relative to its current debt or for future borrowing.